Agrify Is a Horrible Cannabis Stock

I have paid attention to Agrify (AGFY) for a long time. While we interviewed the CEO at New Cannabis Ventures twice in 2021, I never liked the stock at all. It has never been part of my coverage at 420 Investor.

The company was a huge disaster, and it changed courses in Q4. In November the company raised $25.9 million selling stock. That same day, I made the company the topic of my weekly newsletter at NCV, discussing a silly cannabis stock move. Almost three months later, I discussed Agrify in my weekly newsletter piece about Green Thumb Industries (GTBIF), which has control of the company, saying that there was too much love for GTI. GTI has dropped a lot since then:

Today, I want to discuss Agrify more closely. I am not publishing this at Seeking Alpha because I don't officially follow the company and write only about cannabis companies on my Focus List at 420 Investor there. GTI is on my Focus List. Note that nobody has written about Agrify at Seeking Alpha in almost three years.

What Is Agrify?

Agrify used to be an ancillary company, but it has exited its legacy operations. It operates out of an office in suburban Chicago in Rolling Meadows. This is a new address, as their headquarters was previously in Troy, Michigan. In March of 2024, it had 39 employees.

The company acquired the Señorita brand that was owned by Double or Nothing LLC in December, issuing 530K shares. The LLC was formed by and owned by winemakers Charles Bieler and Joel Gott. Their beverage contained hemp-derived THC:

I am kind of a fan of THC beverages (and hemp-based cannabinoid products), though they face substantial regulatory risk. I wrote an NCV newsletter recently, discussing the two sides of the street for cannabis.

Agrify has a Board of Directors that has changed, with a few new additions. The Interim CEO and Chairman of the Board is Ben Kovler, the CEO and Chairman of GTI. The company named Brad Asher as CFO in March. Asher was the AYR Wellness CFO previously.

How Many AGFY Shares Are There?

The Agrify 10-Q filed on May 9th stated that there were 1.95 million shares outstanding as of 4/28.This excludes potentially dilutive securities that were outstanding then. The capital raise from November took place after Green Thumb Industries stepped in and took a $10 million convertible note with 10% interest through RSLGH, LLC (a subsidiary). The note was amended in May, and interest payments are payable in warrants rather than cash. The convertible note has a $3.58 conversion price, so it is deeply in-the-money.

The current warrants outstanding total 7.6 million at $7.30, deeply in-the-money currently. There are some options outstanding, but they are way out-of-the-money. There are 102K restricted stock units (RSUs) outstanding.

Factoring in the warrants, the convertible and the RSUs, I get a share-count dramatically higher than just 1.95 million shares. Of course, this will boost the cash of the company as these securities become outstanding shares.

• The warrants will add 7.6 million shares (and $55.5 million cash)

• The convert will add 2.8 million shares (and improve balance sheet, wiping out $10 million in debt)

• The RSUs will add 0.1 million shares

Note that this is not for sure. There could be additional dilution, or it may not all happen. Still, it helps understand the current valuation. Adding these shares, the total share-count is potentially 12.45 million shares. This would be a market cap of $299 million.

I discuss the valuation below, but I want to share that on May 20th, Agrify and another subsidiary of GTI entered into a purchase agreement. Agrify paid $5.075 million for licenses of GTI. GTI took more convertible notes from AGFY, this time convertible at $23.53. The convertible debt now totals $30 million, so this was an additional $20 million. I don't include this in my analysis, but holders of AGFY should be aware.

How Was Q1 for Agrify?

Total revenue for Agrify in Q1 was just $538K. The gross margin was 16.7%. Operating expenses were $3.8 million, resulting in an operating loss of $3.7 million. The company disclosed that in the first three quarters of 2024, total revenue for Double or Nothing, LLC was $803K.

It gets worse! While AGFY has a lot of cash still from the November equity sale, it is burning cash in its operations. In Q1, the cash used in operations was $6.7 million. It ended Q1 with $24.4 million. The cash consumed was only partially related to its increase in inventory from $500K at the end of December to $738K at the end of March.

How Is Agrify Valued Currently

At the end of Q1, AGFY reported total equity of $26.8 million, down from $28.1 million at the end of 2024. This includes substantial goodwill and intangible assets. Removing those, the company reported tangible equity of just $8.5 million. At $24.01, the market capitalization based on shares currently outstanding is $46.8 million, which is 5.5X tangible book value. The true market cap is much higher, and the tangible book value does not provide strong support for the stock.

The tangible book value will increase substantially if the convertible notes (excluding the very recent one) are turned into equity and if the warrants are exercised. Under this scenario, tangible book value would rise from $8.5 million to $74 million. The share-count, though, at 24.45 million would give a market cap of $299 million at $24.01. The price to tangible book value ratio would be 4.0X. This would be better than the current ratio, but it still would not protect it from downside.

More important to most investors is the potential upside. To assess this, one must look at the future revenue and earnings. I haven't seen any analyst reports yet on Agrify and the Koyfin system I use for analysis like this has no estimates. Maybe THC beverages will take off, but maybe they won't. Annualizing Q1 revenue gives annual revenue currently of just $2 million, and this $299 million market-cap based on fully-diluted in-the-money shares is ridiculously high compared to that level. Well, what if sales aren't $2 million but $20 million? STILL RIDICULOUS! A beverage company that I respect, Boston Beer (SAM) has a good balance sheet, high insider ownership and an excellent long-term track record. It trades at just 1.2 X enterprise value to revenue, a massive discount to AGFY. It also trades at 10.4X projected adjusted EBITDA. The company, which has net cash, trades at about 3X tangible book value.

Some may object to my comparing the very immature AGFY to a larger and more mature SAM, but perhaps they don't realize that SAM is in the THC beverage business as well. Their operations are currently in Canada, but they will enter the U.S. if things get better on the regulatory front. Ben Kovler, who runs both AGFY and GTBIF, sure likes SAM! He discussed merging with the company in early June.

The Agrify Chart

I called out AGFY when it did the capital raise in November at $22.30. It is currently slightly higher, but it has been very volatile.

The stock has rallied a ton since early November, but it has dropped by 62% since the peak in early December. In 2025, it has dropped 17.2%. The stock is up 82% since it bottomed in late April near $13.

Conclusion

Agrify is a silly company that is massively overvalued in my view. I have a lot of respect for the company that controls it through investment and its leadership, though the game annoys me. I also like the wines produced by the Senorita founder Joel Gott.

As I said, I don't cover AGFY at 420 Investor. I wish GTI the very best, but this stock is atrociously priced in my view. I am sharing my views to help educate investors and potential investors in AGFY.

The bottom-line here is that THC beverages are a huge unknown. Maybe Kovler will do great things with Señorita, but he must blow away the current revenue level and drive big profits to make the current price make sense.