Investment Bank Reiterates Confidence in Tilt Holdings Inc (CNSX:TILT) Following Large Write-Down

Following Wednesday’s shock & awe filings release, TILT Holdings Inc (CNSX:TILT) (OTCMKTS:SVVTF) has received staunch support from at least one Canadian investment bank. Yesterday, Canaccord Genuity reiterated their $7/share “Speculative Buy” target despite a large impairment loss on goodwill, which saw TILT Holdings write-down $496.44 million in non-cash losses.

In reaction, TILT shares had a really bad day. With the optics of such a large write-down surprising investors—and with some concern the company may miss its audited financials deadline (they filed on Day 120)—Thursday’s news/messaging cycle wasn’t working in their favor. In response, the stock fell↓18.42% despite Canaccord’s defense, on the 4th highest volume ever recorded.

Speaking of Canaccord’s defense, they’re choosing to go beyond the ugly headline number. In a May 2nd note to investors, the investment bank continues to believe the sum of the parts is more valuable than the market in recognizing at present. This includes “strengths brought to TILT by the Baker Technologies (vast dispensary relationships, data) and Briteside (significantly lower cultivation costs) businesses. They are also note that “run rate for revenue and EBITDA should accelerate dramatically in the back half of the year, keeping full-year expectations
within reach.”

Overall, Canaccord’s C$7 price target is derived from a sum-of-the-parts discounted cash flow analysis of the company’s exposures in existing operations and near-term opportunities. They utilize a 12% discount rate, a terminal growth rate of 2% and a CAD/USD exchange rate of C$1.30/$1.00 valuation methodology to arrive at an EV/EBITDA multiple of 7.3x to their 2020 estimate.

While holding a significant amounts of goodwill in inherent to cannabis sector companies, writing off such a large portion relative to its market capitalization is unusual. Perhaps TILT Holdings officials were provide additional commentary as to why in the coming days. But for now, the company has a powerful ally choosing to look into the future rather than the past.

We note that Canaccord Genuity has a past history of raising capital for TILT Holdings—although the report certifies that the “recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views”. Pursuant to an agency agreement dated November 16, 2018, Canaccord Genuity Corp. (and syndicate) helped the combined entity complete a private placement of 22,886,858 subscription receipts at a price of C$5.25 per for aggregate gross proceeds of $120,156,004.

Today, TILT Holdings is having a much better time of it. At publishing time, the stock is currently higher by $0.13 to $2.30 (5.99%). The company’s CEO, Alexander Coleman, is scheduled to appear on Midas Letter RAW today.

Original article: Investment Bank Reiterates Confidence in Tilt Holdings Inc (CNSX:TILT) Following Large Write-Down

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