F’Grizzle’s Scotty Wizzle, $219M in losses ain’t no dizzle

Featured image of Vladdy whiffing on a curve ball by J.Meric, borrowed from Beyond the Box Score

The language of new money™ isn’t bothered that they’re off by a country mile

As our twitter followers are aware, Fundamental Hype was puzzled this past Wednesday by an article from Grizzle || The Language of New Money™ run under the byline of co-founder Scott Willis titled: ACREAGE HOLDINGS Q4 2018 EARNINGS – IGNORE THE LOSS, FOCUS ON THE OPPORTUNITY, encouraging its readers to consider Acreage Holdings (CSE:ACRG.U) just as its title suggests.

The article is built around graphics that compare Acreage’s estimated earnings per share and sales multiples in 2019 to those of its peers. The graphics cite “SEDAR, Grizzle Estimates, Bay Street Estimates,” as a source for the future earnings and sales of sixteen different companies and, since neither Toronto’s Bay Street as a whole or public filings library SEDAR make estimates, we’re going to go ahead and guess that Scotty just dreamed up earnings projections for 16 potcos all by himself – the Language of New Money™ speaking in tongues, like an agent of the divine.

Dream-it-up Scotty

Scott Willis doesn’t say whether the 2019 sales figure used for ACRG in this chart is the $92M that one gets from an annualized pro-forma Q4 (seriously), or the $282M “consensus estimate” projected using that projection.
No word on which Bay St. sidewalk the estimates were spray painted on.

Willis’ charts appear to be based on a 2019 “consensus revenue estimate of $282M for Acreage,” though he doesn’t say whom that consensus is between. It also fails to add up with the annualized “consensus estimate” of $92M from Q4, based on pro forma earnings of $23M from last quarter, and if the concept of pro-forma revenue form a quarter that a company is presently reporting on confuses you, pro forma usually being used to project the future, and Q4 having ended December 31, 2018, you’re not alone.

Grizzle head of research Scott Willis, shown here sneering at the concept of needing quarterly reports to write about a company’s quarterly earnings.

When we asked Willis how to make any sense of this on twitter, we were blocked for our trouble, so we went to SEDAR for a look at the quarterlies only to find that they had yet to be filed, which is curious, because the opening paragraph of Acreage’s March 12 press release states that: “Financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) and management’s discussion and analysis for the period have been filed on Acreage’s SEDAR profile…”

Six days later, with the Financials and MD&A still not filed on SEDAR, the only insight into where Willis got his projection comes from the  company’s “detailed presentation” concerning their financial results, linked here on the company website, because it isn’t filed on SEDAR either, where we learn that Acreage and Grizzle have similar tendencies.

The powerpoint presentation that Acreage has released in lieu of financial statements reports a top line gross of $4M on $10M in Q4 when counting by the stuffy old IFRS rules that demand a company only report revenue and expenses from assets they own in the period being reported for. Acreage would prefer to have us consider their Q4 with backward projections that include revenue from properties acquired after the quarter ended, and that seems like a neat exercise, one that would require line items from these acquired companies’ financials, and Acreage can’t even seem to post their own financials, so we’re going to hold off on comment on that one until they do.

Effectively, this makes Scott’s $282 million 2019 revenue projection for Acreage a projection based on a projection, and that means it’s far more interesting to examine how and why Grizzle came to run interference for Acreage, and the way the Language of New Money™ covers markets in general.

Tommy Boy!

Poorly sourced projections are a staple of the Grizzle playbook. So much so that Willis’ Grizzle co-founder Thomas George was pretty upset in this video on Grizzle sister site Capital 10x about sell side firm Jefferies Group using a similar graphic in their own research.

 

George delivers an animated, finger-pointing whine about Jefferies “copying” a Grizzle chart that compares various potcos’ enterprise values in terms of EBITDA projections that appear to have been invented by Scott Willis. The Jefferies graphic compares those same EVs to sales estimates that they appear to have invented themselves. We consider that to still be pretty flimsy, though more reasonable than projecting earnings for growth-stage giants with multiple variables on the expense side of the income statement, but Thomas has it down to Jefferies being too dumb to invent an EBITA. They “don’t have the mental horsepower” for it. The “mofos” ripped off his graph, and George is incredulous that they have the nerve to re-do it using their OWN estimates! “Put Capital 10x! Put Grizzle!” He’s coming for them! Gonna steal their investment banking fees!

Tommy replied to my inquiries about whether or not Acreage was a Grizzle client by saying that he’s a fan of my work (thanks for reading!) but not of my style (tragedy). He gave me some unsolicited advice about getting momentum by ceasing to talk about “mundane financial shit,” but never did answer the question.

 

When I pointed out that the $20/post offer that the site had previously made to me when they wanted me to write for them was pretty pathetic, he blocked me too, which isn’t surprising, and didn’t really upset me, but then Tommy just kept on yacking…

… giving us all an idea of what he thinks about writers who want to get paid a reasonable rate for what they do.

It isn’t clear what George’s role is at Grizzle or Capital10x. He doesn’t have any bylines on 10x, and his Grizzle book is pretty thin. A brief reading shows articles built around charting analysis by associate John Mastromattei, and very little original thought.

The “mom’s basement” trope is too much of a cliche to trace where he copied it from, and I don’t think it matters where Fundamental Hype blogs from. I dare say our readers are more interested in what we write than who runs the place, but since this emoji-abusing goof didn’t return phone calls or emails seeking to sort this out, I’m happy to oblige.

The view from Mom’s basement.
Fundamental Hype Editor in Chief Braden Maccke, pictured here reping VRC Rugby and Vancouver punk rock legends D.O.A.

Anyone curious about what Fundamental Hype is about can look it up on our About page, which includes our very simple disclosure policy:

WE DON’T GIVE INVESTMENT ADVICE

Fundamental hype is not qualified to tell you how to manage your money. You should talk to a pro about that. We’re just bloggers. If we have a position in a company we write about, or a company has paid us to write about them, we say so.

Scott’s Grizzle article about Acreage does not include a position disclosure and doesn’t say if Acreage has paid to be covered. Grizzle and Capital10x bury what appears to be a disclosure policy in extensive Terms and Conditions pages, among a wordy disclaimer of liability. Anyone whose search party finds it will learn that it says:

Grizzle may seek or may be currently doing business with companies featured in content originating on Grizzle.com.

But if you ask them whether or not they’re doing business with a company whose earnings they’re covering, complete with some bullish charts made from unknown inputs, without mentioning the fact that, contrary to the company’s assertion, the Financials and MD&A have not yet been filed on SEDAR… BLOCKED!

This policy surprised us, because the Grizzle founders had previously been happy to laugh along with us at a similar obfuscation of relationship at The Midas Letter. Willis doesn’t tend to say too much, George has questioned The Midas Letter‘s credibility on several occasions, but our very favorite partner in ridicule when it comes to laughing at Ben Smith is:

The one and only Johnny Lambo.

Cannabis twitter sensation John “Johnny Lambo” Mastromattei is a familiar figure to anyone who follows Canadian pot stocks. Johnny Lambo can be found flinging around rocket emojis like they’re Halloween candy and giving his considerable following unfiltered takes on cannabis companies, energy companies and the general markets. Johnny Lambo is well liked and deserves it. He understands fundamental analysis, understands technical analysis, and demonstrates a well-earned, knowledge-based instinct that appears to have served him well as a media personality and as a trader.

Johnny Lambo appears in Capital10x videos, and any kind of technical charting that George cites is always credited to him, but is very clearly a distinct entity. I dragged him in to my mudfight with Tommy and Scotty, but he didn’t block me and certainly didn’t get rude the way Tommy George did. Lambo did a periscope live stream the next day in which he promised to talk about disclosure statements in financial media at my request.

When I asked, he appeared to think that I was throwing shade at the thin disclosure policy of the “infomercial” that calls itself The Midas Letter, which I was, and seemed a bit taken aback when I dragged Capital10x & Grizzle into it. I quit pushing on the live stream, because the bulk of the viewership would likely rather he talked about the market, and I was surprised to find once it was over that Johnny followed up with me via twitter to ask if my questions had been answered.

They hadn’t, of course. And I don’t expect Tommy or Scotty to get back to me or to quit embarrassing themselves like this, but after I reiterated my questions, Johnny decided to show them just how easy it was to tell one’s audience what the deal is:

The Lambo Livestream was some of the best financial media I’ve seen in a long time. Johnny comes across knowledgeable and genuine. The lo-fi aesthetic suits an off-the-cuff style that he can carry because he knows his business. I’d very much like to see a version of this with a producer handling the questions, so that Johnny can use his moments of focus to tell us what he’s looking at market-wise, instead of doing triage on the chat. When I said on twitter that I’d much rather watch The Johnny Lambo Hour than anything on BNN, I was dead serious.

Bottom line

Contrary to popular belief, I don’t think there’s anything wrong with financial media companies taking money from the companies they cover. I just feel like their credibility is shot if they’re scared to tell their audience about it, and the advertorial bleed attains a level of comedy when they’re running interference for a company who released a powerpoint deck instead of financials.

There is discussion of large blocks of Acreage Holdings having unlocked on the 15th or 16th of March, right after Scott loudly projected that they would have $282 million in revenue in 2019. We’re not sure how much stock or when it unlocks (and aren’t even going to look before those financials show up), but could venture a guess about how they’re creating the buying to soak it all up.

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About Braden Maccke 69 Articles
Founder and Editor in Chief at Fundamental Hype, a blog about venture stage finance and the media that supports it.

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