Green Thumb Industries Vs. The Chicago Tribune
Tale of the Tape
On March 29th, 2021, the Chicago Tribune, citing unidentified sources, alleged Federal investigators are looking into Chicago-based Green Thumb Industries (GTI). Green Thumb is one of the most robust multi-state operators in the United States, with operations in ~15 states, 56 operational retail stores, and 97 total licenses, including nine in Illinois. The company was named a 'Best Workplace 2018' by Crain's Chicago Business and MG Retailer magazine in 2018 and 2019.
(GTI CEO Ben Kovler & MSOgang Mascot)
A company spokeswoman, Linda Marsicano, said Green Thumb Industries was not aware of any probe when the Chicago Tribune requested comment:
"Green Thumb takes compliance very seriously and operates with the highest standards of ethical business conduct, we are not aware of any such investigation."
While the report alleges "investigators have been scrutinizing campaign donations, and other steps Green Thumb Industries took as it sought to secure growing and distribution licenses in Illinois and several other states." The report stated, "It's unclear what specific aspects of Green Thumb's political giving, hiring or other activities are being scrutinized by federal authorities. The exact time frame and origin of the probe were not known." However, anyone can find all those campaign donations GTI and the Kovler family have made as they are published online.
The Chicago Tribune reporters were able to cite all of the political contributions because Green Thumb Industries fully complied with all reporting laws and regulations. Political contributions are legal when they're within the legal limits and reported in a timely fashion. Only proof of a quid pro quo agreement would make the company's actions illegal. These donation amounts do not ring any alarm bells. No charges have been filed as part of this so-called investigation. GTI announced it was unaware of any investigation almost immediately.
Green Thumb's founder and CEO, Ben Kovler, by the mere fact he is a private-equity manager whose ancestors started Jim Beam whiskey and is now involved in cannabis, was cast to be the Chicago Tribune's 'heel' in this report. This is a hard sell when there is a Kovler Lion House and a Kovler Seal Pool at Lincoln Park Zoo, a Kovler Diabetes Center at the University of Chicago Medical Center and a Kovler Hall at the Chicago Public Library. However, Ben Kovler has no issue being wrestling's equivalent of the 'heel' of cannabis legalization. As evident by his iconic back and forth with boomer suit and CNBC Power Lunch host Tyler Mathisen.
With just a single sentence phrase: "New Facts Are Hard." It was as if a legend was born. As if the hero the #MSOgang deserved had finally come out from the shadows. Ben Kovler became more outspoken on social media in the coming months creating even more fanfare. Then the haters started coming out of the woodwork again. Cary Neiman, in his court filing, alleged Ben Kovler said, "My access to capital and the relationships I have forged within the Illinois business and political world from (Chicago) to Springfield, as well as my family's name, means that without me it is doubtful you will even secure one license."
What the Chicago Tribune failed to discuss was why Cary Neiman is suing Ben Kovler and GTI in the first place - jealousy and envy. Cary Neiman is a disgruntled former employee/founder trying to leverage his legal dispute over Kovler and GTI. Furthermore, alleging Kovler hijacked GTI and his swagger from him; "He basically took all the knowledge I gave him, and all the lingo, and I hear him in the meetings and he would drop it." According to Neiman, Kovler has offered just $275k and wants more to fund his own cannabis venture 'Mazel Tov Farms'.
(Cary Neiman Green Thumb Tattoo)
Despite the Tattoo. Cary Neiman is not in a position of power. He has been talking to the media for many months, and by going to the media, he is trying to play the sympathy card by attempting a character assassination of Ben Kovler. Neiman further goes on to mention his house was destroyed in the wildfires and that he is essentially homeless despite founding a multi-billion dollar company. Likening his story with Kovler and GTI to that of the Winklevoss Twins and Facebook is likely enough reason alone to believe that he is one of the anonymous sources used by the Tribune. Ben Kovler probably knows it too, alluding to the Tribune's inability to use "credible sources." This Chicago Tribune report is more of a story about failed friendship than it is about 'pay-to-play.'
This has turned into an issue about licensing scrutiny after the latest February court hearing between Neiman and GTI/Kovler didn't provide a remedy. It is hard not to believe Neiman is the source. He already alleged in court that Ben Kovler demanded Neiman teach him everything cannabis-related so GTI would be educated enough to get the licenses they needed at the time. With Neiman's cannabis experience and concept for Green Thumb Industries and Kovler's capital and contacts, they would almost certainly be awarded all of the licenses GTI applied for.
The Chicago Tribune was seemingly doing some of Neiman's dirty work as modern-day wordsmiths. However, it is what was left unsaid by the Chicago Tribune that is vital to the motive of the source of information. Neiman alleged he was unable to get a 1% ownership and share agreement for GTI on paper of which Kovler and Neiman had consummated in a handshake deal. Neiman was promised a $120k annual salary and title of co-founder in addition to the equity stake, alleging it was in part due to Kovler's concerns about background checks in relation to Neiman when applying for licenses. Once again, this brings into question Neiman's credibility. Kovler likely commiserated an agreement between the two. But the question remains. Did Ben Kovler hijack GTI from Neiman? Highly unlikely.
As a GTI investor, I am not thrilled Kovler could not settle the issue out of court. Neiman's demands are not outrageous compared to the damage he's seemingly conspired to do, along with the helping hand of the media. It's opened an entirely new can of worms in discussions around 'pay-to-play.' The legacy grower versus suit type fund manager is always a losing battle from an image standpoint but this is now morphing this into a 'pay-to-play' conversation. It's more than personal now, and it is undoubtedly hurting some investors' confidence in GTI no matter how truthful the accusations are.
Despite the allegations by the Chicago Tribune, GTI's investor base is stronger than ever. Ben Kovler's star-power has never burned brighter. Early investors and insiders seem unfazed, according to Peter Kadens. Other early investors in GTI included Ari Levy, whose father founded Levy Restaurants group in Chicago, and Emily and Morgan Paxhia from Poseidon Asset Management. GTI also boasts the most institutional investments than any other MSO and has analyst coverage from 16 investment banks.
What was most admirable about Ben Kovler during this entire Chicago Tribune saga was when he was being called out for bribery. Like a stereotypical heel from the WWE, upon the report being published, Ben Kovler charges out from backstage with a steel chair in hand to defend himself, swinging a steel ladder at the Chicago Tribune with reckless abandonment live on Twitter. While the retail investor community appreciated the prompt and strongly-worded response, the Chicago Tribune was effectively rebutted by Ben Kovler. The stock recovered in one day's time. However, the optics still didn't look great for GTI.
What transpired next between the Chicago Tribune and GTI is all for show, as if it were the WWE. Investors think it is a real fight as unknowing victims of fandom. Lawyers are waiting patiently for a reason to sue, but it's all a gimmick. However, unlike the WWE, there is no predetermined winner, but the 'heel' is always known to lose. However, Ben Kovler wasn't going down without a fight, as the following day, GTI issued a formal statement declaring the accusations by the Chicago Tribune baseless. Green Thumb further demands an immediate retraction of the article by the Chicago Tribune. Ben Kovler echoed much of what he already said on Twitter in the Press Release:
"The Chicago Tribune has published unfounded allegations that completely contradict our corporate values, The reporters did not cite any credible sources nor evidence, and published under a salacious front page headline intended to mislead. This is not just irresponsible journalism but reckless behavior that impacts the livelihood of our employees, the close bond to the communities in which we serve, and the trust of our investors. Our company has secured licenses through competitive state-run programs and traditional M&A transactions. We have taken painstaking measures to scale compliantly as we provide access to well-being through cannabis, and will continue to hold ourselves to the highest standards."
The Chicago Tribune didn't shy away from firing right back, with the editor-in-chief Colin McMahon stating, "The Tribune stands by its reporting and will continue to pursue the story." This is all part of the Chicago Tribune's smoke show. An immediate retraction by the Chicago Tribune was never going to happen, which could open them up to legal liability. However, it is almost a certainty that GTI will not sue the Chicago Tribune as there is enough smoke created by Neiman and GTI's choice of lobbyist to argue there could be fire.
The moral outrage that the Chicago Tribune is attempting to create under the guise of a local story is unwarranted. GTI, and other companies already licensed to sell medical pot, are at a far greater advantage than their counterparts. This gives GTI a considerable head start in Illinois, making Illinois the cornerstone of its operations, a state that just announced a record $109m in sales for the month of March. Meanwhile, the Chicago Tribune is more focused on mocking one of the state's biggest success stories with smears about 'pay-to-play.'
Stooping to the low of inferring GTI broke the law to obtain its license in the state is painstaking. You can't buy the success and growth that GTI has had, even if your name was Warren Buffet. Pay-to-play scenarios are generally very hard to prove. The fact GTI was given the first licenses for recreational sales when the bill passed in 2019 is not reason for suspicion or cause for concern. The exact same thing is going to happen on New York. I would rather invest in a company that has first-mover advantage than one hurling Molotov cocktails from the cheap seats.
For every winner celebrated, there remains a million unsung failures. This Chicago Tribune story undoubtedly stems from a suit by Cary Neiman, and a broken friendship with Ben Kovler, which is currently pending and on full display in Cook County Circuit Court. One can expect until Neiman is made whole, he will continue to allege that Kovler bragged, in an early meeting in 2014, that his connections to powerful business people and politicians in Illinois would make them a sure thing for any licenses they would need. However, it will not be GTI's demise. Pay it little attention; GTI is a success story. Nothing has changed with the Chicago Tribune report.
Neiman's pressure tactics could be seen by GTI investors as an extortion attempt if he was named as the source. Some GTI investors are demanding legal action to be taken against the Chicago Tribune. Therefore, it was strategically sound to remain anonymous and let the newspaper take on the legal liability. Neiman seems to be at the end of his rope with the lawsuit and the media appearances. This story has primarily gone unnoticed for months. However, the Chicago Tribune article has been given more weight than warranted, as it comes on the heels of various other US-wide cannabis-related bribery and pay-to-play investigations.
Alden, a New York-based hedge fund, is the Tribune's biggest shareholder and is attempting to purchase the company outright for $633m. This leaves investors to question if Alden was paying to play. The answer is not so simple. Shortly after Alden bought The Denver Post, the same group shut down "The Cannabist," a branch of the paper that covered cannabis-related news. Alden seem to be anti-Cannabis. What does the Chicago Tribune obviously stand to gain by publishing these unfounded accusations? Salacious and controversial anti-cannabis stories about the most significant growth sector since alcohol. Stories that could drum up the much-needed readership a dying local newspaper needs to survive.
Salacious and controversial stories of recent times past that I will take a more in-depth look during the next PotStonks newsletter titled: "Tree Shakers & Law Breakers," which will further examine MSO's love affair with lobbying and the pay-to-play scheme griping America's Cannabis Industry. Thank you for the support, as always. Please feel free to share and encourage others to sign up. Follow me on Twitter @BettingBruiser