Why I Do Not Like the Stock of Glass House Brands

Glass House Brands (GLASF) is up a lot over the past couple of years, but it tanked recently after a raid by ICE last week. I have been following the stock for a while, though not so closely that it is included on my Focus List at 420 Investor, which is currently 20 stocks. I have dropped a few, but I still include a lot of MSOs (7). Because it is not on my Focus List, I am not writing about it on Seeking Alpha. There have been two articles published there this year, and both were rated "Buy." I expressed comments on both of those articles.

I write a lot of articles at Seeking Alpha, but I am sharing this here because it is not on my Focus List. I do discuss the stock each Friday with 420 Investor subscribers, as I am monitoring it for potential inclusion on the Focus List. The stock is one of just 3 MSOs in the New Cannabis Ventures Global Cannabis Stock Index, as I detailed in late June. That 13% weighting was very low (perhaps a contrarian buy signal!).

There Is a Lot to Like

While my article has a negative thesis, I do like some things about the company, which was formed in 2015 as Glass House Farms. While many did not or do not like the CEO, Kyle Kazan, because he was in law enforcement, I think he is a very strong leader. Yes, he was on the "other team" a long time ago, but he is no longer. In fact, he speaks on behalf of Law Enforcement Against Prohibition (LEAP). Kazan has a background in real estate and investment funds.

I like that the company is vertically integrated, meaning that it not only grows cannabis but it sells it through its own stores. The Farmacy seems to do things well. And it is not just cannabis flower that the company sells, as it has pre-rolls (okay, that is flower!) and extracts. I do not know if the Mama Sue product is good, but I can say that Sue Taylor, its Brand Ambassador who leads it, seems like a good person too. She was a principal at a Catholic school, and she co-founded Farmacy in Berkeley. In 2009, she founded iCann with her son and his wife in order to help educate seniors about medical cannabis.

The company is dedicated to scale and low-cost production, and these things are good for owners potentially. The reported growth in revenue and adjusted EBITDA has been strong.

My Take on the ICE Raid

The raid by ICE and Homeland Security took place on Thursday, July 10th during trading hours. The Santa Barbara Independent reported it well. Politico on Sunday discussed how one farmworker died. There have been reports of children involved too, though it is not clear that they were working. Glass House has not issued a press release, though it did make some postings on social media, though this was afterwards. here is the trading over the last few days:

I discuss the chart below, but I wanted to point out that the stock was near $9 on Thursday before the raid, and it dropped nearly 50% subsequently. The early move was higher on Friday as the news became more disseminated.

I am not that concerned that this is an issue, though it may be. The company is trying to control costs and may be breaking federal laws. If so, that would be negative.

What Not to Like

I discuss below the chart and the valuation, and these are currently reasons to not like the stock, and many are concerned about the potential use of illegal immigrants (and children), though this is not a big issue for me (as I discuss above).

So, what is the big issue? I have nothing against these two, but Marc Cohodes and Aaron Edelheit have been pushing it very hard. I have known Cohodes a long time (50 years), as he was a counselor at my summer camp in Wisconsin. When I lived in NYC, I saw him too. Cohodes is a smart investor in my view. He is known for his shorting, but he has a lot of experience in longs too. He is very long GLASF, and I think I understand his interest, but I think that he is over interested. He has been very loudly involved and owns a lot of stock. I have never communicated with Edelheit, who runs Mindset Capital and lives in Santa Barbara. Mindset owns a lot of shares too. Cohodes, who lives in California, knows GLASF, but does not seem to know the entire cannabis industry. Edelheit does follow other cannabis companies.

While having strong supporters is not bad in and of itself, it can lead to problems. First, because they own so much, it does reduce the float. Second, it can cause the price to go up. Why? More interest and low float. I am not intending to tear up all of their arguments, which I have heard or read, but I have seen some issues. Instead, I want to discuss the float. Insider own 4.8 million shares of the common stock. Finding the holdings of other investors is not easy. Cohodes claims to have millions of shares, and Mindset converted its preferred stock. Edelheit claims to own stock, preferred stock and warrants in his fund.

The company has a funky capital structure, with preferred stock and debt. The recent filings on SEDAR suggest that there are 61.1 million limited voting shares outstanding, plus 7.1 million subordinated voting shares and 2.3 million restricted voting shares. There are also 4.75 million multiple voting shares and 6.9 million exchangeable shares. There are also 44.4 million options. There is also preferred stock. The company does a poor job in its quarterly filings of giving the fully-diluted shares. The financial statements claim that there are 81.1 million diluted and basic shares outstanding. This would be based on in-the-money options and other securities. In June, the company awarded 3 million performance shares with a $30 minimum price to become vested. This really excited Cohodes, but I find it rather meaningless and would not predict $30 based on this. The paperwork suggested that there are 130 million fully-diluted shares, including out-of-the money shares. GLASF float needs to be reduced by the holdings of the insiders, MSOS, and Cohodes and Edelheit.I don't cover this company and am not going to say what it is, but it is lower. I look at the daily trading, and 344K shares per day is not huge.

Another issue I have is that AdvisorShares Pure US Cannabis ETF (MSOS) owns a big block, which makes the float even tighter. I have publicly criticized MSOS for quite some time. While it has had a small inflow recently, there is a big risk that it could see outflows again. In 2025, the share-count has increased by 2.4%. It was up 4.8% in early February and fell to up 1.2% in late April. In 2024, it increased 50.6% as many were excited by a potential rescheduling. In late 2022, and into early 2023 it actually fell 13%. Share creation and redemption is a complicated process, but it does go both ways. MSOS has a market cap of $344 million roughly and has decent volume, Many people seem to appreciate that it trades on a higher exchange and does have options trading. GLASF is currently the fourth-largest holding at 7.3%. I think that MSOS could melt down, and the ETF would have to reduce its exposure, which is currently 4.77 million shares (13 days of trading).

The company can sell legally only in California, but its products have made it to other markets, like New York. Were these actual products or just the brand? Hard to tell! From my understanding, there are distributors buying from Glass House and selling illegally out of state. The company is working on an initiative to perhaps grow hemp, which is federally legal. I think it is way too early to get excited about this. The hemp industry faces potential negative rules changes from Congress, but, more importantly, the company is not yet in the highly competitive industry.

There are some other things I do not like. First of all, the company does not file directly with the SEC. It continues to file with the Canadian regulatory system, using SEDAR. Most of the MSOs have migrated from SEDAR to the SEC website, though not all of them. Another issue is that it is just California. I have nothing against California, but it is just one state, and one that is having a tough time right now.

The Chart for GLASF

The stock set a new recent high right before the raid, but the subsequent pullback is not a new six-month low:

GLASF is down 9.0% in 2025, but this is a lot smaller of a decline than the overall market. The NCV Global Cannabis Stock Index, which closed yesterday at 5.39, is down 21.7% in 2025. MSOS has dropped 31.2%. Note how high the volume has been the last few days!

Looking at the three-year chart, one can see that the stock has rallied a lot ince the end of 2022, when it was below $2:

Since 12/31/22, GLASF, even after the recent pullback, is up 176%. The Global Cannabis Stock Index has dropped 44%, and MSOS is down 62%. I was kind of surprised that the stock got through $10 in 2024, as this was the original SPAC price.

So, while the stock has pulled back sharply, it has far outpaced other cannabis stocks in 2025 and since the end of 2022.

The Valuation of GLASF

I mentioned above that the company has a funky capitalization, and valuing the company means that one has to take into account the other securities beyond just the stock.

There is not a lot of cash flow. Yes, it was positive in Q1 ($2.5 million), but this is low and below the capital spending. In 2024, operating cash flow was $28.4 million, up from $23.2 million a year earlier and ahead of the $10.3 million capital spending. Most MSOs do show higher operating cash flow than capital spending these days.

The debt as of 3/31 was $66.2 million. The good thing is that it is not due real soon. Part of this is convertible debt, and the $11.9 million can convert at $4.08 (or higher), and this would be 2.9 million shares at that price.

On the stock, I include 489K outstanding options with a $3.10 exercise price, the 6.78 million RSUs, no warrants (they are $5.00 to $11.50), 2.9 million shares against the convertible note and 70.6 million shares for a total of 80.8 million shares. Using the closing price of $5.28 from 7/15, that is $426.6 million. Adding in the debt (net of the convert), adds $54.3 million, for a total of $480.9 million. Adding the $89 million preferred stock, pushes it to $569.9 million. Subtracting cash of $34.6 million, the enterprise value totals $535.3 million, which is very high in my view. In 2026, Koyfin suggests that the analysts expect adjusted EBITDA of $67.1 million, leaving a ratio of 8X. This is very high compared to other MSOs. The tangible book value of GLASF was reported at $116.5 million. Assuming the convertible note is converted, the debt would be reduced. Adding in the options being exercised would also increase the cash. The $426.6 million market cap divided by the adjusted tangible book value of $129.9 would be 3.3X. Most MSOs have negative tangible book value, but Green Thumb Industries (GTBIF) has positive tangible book value and a strong reputation and less debt. Its ratio is lower than GLASF's at 1.9X.

Conclusion

I have explained my concerns with GLASF. As I said, while I do pay attention to it, I do not officially cover it yet. I am aware that I may be missing something. While I do not think that the ICE raid is necessarily a big deal, it could be. I have other reasons not to care right now.

Additional Resources

• Glass House Investor Relations

• Q1 Investor Presentation

• SEC Filings