By Michael Kim
OTC:VREOF
READ THE FULL VREOF RESEARCH REPORT
ONGOING M&A
Following the transformational acquisitions of Wholesome, Proper Brands, and Deep Roots Harvest in the first half of 2025, Vireo Growth (OTC:VREOF) management has remained aggressive on the M&A front. While we walk through each transaction in detail next, management remains focused on building a diversified network of local operators across financially attractive and complementary markets at a high level. On a pro forma basis, Vireo Growth will operate 166 dispensaries across 10 states (CA, CO, FL, MD, MN, MO, NM, NV, NY, and UT), with approximately 800,000 square feet of cultivation and production facilities, as market shares continue to roll up to scale-enabled Multi-State Operators (MSOs). While independent management teams retain control of day-to-day operations, affiliated companies can leverage shared corporate services to facilitate operating efficiencies and enhance growth. From a financing standpoint, Vireo’s strong balance sheet remains a key competitive advantage relative to most other U.S.-based cannabis operators that typically struggle to source capital to fund growth due to regulatory restrictions. Indeed, the company maintains ample liquidity to continue to capitalize on accelerating consolidation trends across the industry, with $117.5 million of cash on the balance sheet as of 9/30/25, as well as long-dated debt maturities and sizeable credit facilities.
Eaze Inc.
In late December 2025, Vireo announced the company entered into a merger agreement with Eaze Inc., a Multi-State Operator with 65 retail dispensaries across California (12), Colorado (14), and Florida (39). The acquisition further diversifies the company’s geographic footprint by adding scale-enabled operations in two of the largest markets is the U.S. – California and Florida. Indeed, Eaze manages California’s largest legal cannabis marketplace providing access via on-demand delivery, with 12+ million cannabis deliveries since inception, while maintaining outsized cultivation capacity in Florida. Management seems open to further acquisitions in Florida, with Eaze acting as the company’s initial beachhead.
In addition to the base consideration of $47 million (adjusted for cash, indebtedness, transaction expenses, working capital, and tax items) financed by the issuance of 83.9 million subordinate voting shares of VREOF (subject to staggered lock-up periods commencing in March 2027 through March 2028) at $0.56 per share, former Eaze stockholders may be entitled to earnout payments (in the form of incremental subordinate voting shares of VREOF priced at the higher of $1.05 or the 20-day Volume-Weighted Average Price as of 12/31/26) based on 3.84x Eaze’s Adjusted EBITDA for 2026 less the base consideration. The transaction is expected to close in the first half of 2026.
PharmaCann
In mid-December 2025, Vireo announced the company entered into an Asset Purchase agreement with PharmaCann Inc. involving the sale of 17 retail cannabis dispensaries in Colorado in exchange for a share consideration of $49 million (adjusted for changes in inventories/trade payables) financed by the issuance of ~116.7 million subordinate voting shares of VREOF (based on the stock’s current price), as well as the assumption of certain liabilities. Furthermore, Vireo and PharmaCann entered into a Management Services Agreement, pursuant to which the company will provide certain management services related to the dispensaries until the closing of the transaction (expected in the first half of 2026). Stepping back, the PharmaCann transaction further expands Vireo’s retail presence in Colorado to 55 dispensaries on a pro forma basis.
Schwazze
In October 2025, Vireo Growth announced the closing of the acquisition of ~$91 million of 13% senior secured convertible notes due 12/7/26 issued by Medicine Man Technologies/Schwazze (OTC: SHWZ) in exchange for 114.8 million subordinate voting shares of VREOF at $0.54 (~$62 million in aggregate). In conjunction with the transaction, the companies entered into a Restructuring Support Agreement (RSA) that contemplates the sale of select Schwazze assets to a NewCo (majority-owned by Vireo), as well as the liquidation/wind down of Schwazze’s remaining operations. Schwazze is currently in default on the company’s payment obligations related to the convertible notes. Vireo has secured financing commitments for up to $62 million for refinancing/working capital needs. Subsequently, Vireo acquired an additional $2.6 million of the convertible notes in mid-December 2025 bringing the company’s ownership stake to 89% of SHWZ’s total outstanding senior secured convertible notes.
At a high level, Schwazze is a vertically-integrated Multi-State Operator based in Denver, Colorado, with 46 retail dispensaries and two manufacturing facilities across Colorado and New Mexico. Focusing on Colorado, Schwazze remains the largest cannabis operator in the state, though market shares remain fragmented. That said, the state seems primed for ongoing consolidation following a more challenging industry backdrop, with VREOF seemingly well positioned to continue to roll up market share, thereby further enhancing the company’s scale and buying power in Colorado.
Hawthorne
In January 2026, the company announced a nonbinding Memorandum of Understanding (MOU) with The Scotts Miracle-Gro Company (SMG) to acquire The Hawthorne Gardening Company LLC, a provider of indoor/hydroponic gardening products. The proposed acquisition involves equity participation in Vireo, likely via the issuance of subordinate voting shares, and is expected to close in 1Q26.
THOUGHTS ON ACCRETION/VALUATION
While we suspect senior management will provide some color on deal-related accretion on the company’s fourth quarter and full-year 2025 financial results conference call, our back-of-the-envelope math suggests a material step up in earnings power following the closing of the Schwazze, PharmaCann, and Eaze transactions. Beyond the rise in revenue related to VREOF’s most recent transactions (partially offset by incremental corporate overhead, interest, and minority interest expenses), key organic growth drivers include the launch of adult-use sales in Minnesota and a step up in New York revenues reflecting the commencement of adult-use sales from the company’s indoor facility.
From a margin perspective, the integrations of Proper, Deep Roots, and Wholesome have largely been completed (including consolidating accounting, finance, human resources, insurance, and procurement operations), with related synergies likely to be fully realized this year. Furthermore, a favorable sales mix shift in favor of higher-margin recreational-use products in the retail channel, as well as management’s continued focus on driving operational efficiencies and economies of scale more broadly likely result in a step up in profitability.
Turning to Adjusted EBITDA (excludes non-cash inventory adjustments and stock-based compensation expenses, as well as non-recurring items), our analysis points to material accretion related to the pending Schwazze, PharmaCann, and Eaze acquisitions.
From a valuation perspective, while we will wait until 4Q25 earnings to officially update our earnings model and $1.50 DCF-derived price target, we look for a material upward revaluation for the stock, as deal-related accretion increasingly comes into focus. Indeed, the stock has traded down since the company reported 3Q25 earnings in mid-November despite the subsequent announcements of the PharmaCann and Eaze acquisitions, as well as the incremental investment in Schwazze. Moreover, Vireo remains uniquely positioned to continue to roll-up accretive assets, with further acquisitions likely representing incremental catalysts for the stock. Finally, a more favorable regulatory backdrop (particularly as it relates to federal rescheduling or incremental state legalizations) potentially drives potent business, economic, valuation, and/or uplisting benefits over time.
UPDATE ON RESCHEDULING
As widely covered, President Trump issued an executive order in mid-December 2025 instructing the attorney general to expedite the process of rescheduling marijuana to Schedule III of the Controlled Substances Act. Looking ahead, assuming the Drug Enforcement Administration (DEA) publishes a final rule in the Federal Register following Health and Human Services (HHS) scientific and medical evaluations, a public comment period, and potential hearings, we would expect opponent groups to immediately file a “petition for review” and request a “motion to stay” to suspend the effective date. If a judge denies the motion to stay, rescheduling takes effect. That said, if the stay is granted, the ruling remains suspended pending the outcome of related litigation, which could persist for multiple years.
Stepping back, the rescheduling of marijuana from Schedule I to Schedule III potentially paves the way for several key benefits for cannabis-related businesses. First, Internal Revenue Code Section 280E would no longer apply, thereby providing for the deduction of business expenses on federal tax returns. Beyond immediate cash flow benefits on a go-forward basis, cannabis companies likely settle outstanding liabilities with the government (VREOF carried $85 million of uncertain tax liabilities on the balance sheet as of 9/30/25). Second, marijuana rescheduling likely improves access to banking/financial services for cannabis companies, thereby lowering costs of capital, all else equal. Third, less onerous tax burdens potentially promote stepped-up spending on marketing and/or research and development, thus enhancing sustainable growth across cycles. More broadly, lower regulatory/financial barriers likely spur growth across the industry, with scale-enabled MSOs seemingly well positioned to gain market share, we believe.
As uncertainty around rescheduling probabilities, implications, and timelines fades, we look for cannabis stocks to benefit from powerful upward revaluations. Further catalysts include potential uplistings to senior exchanges (NYSE, Nasdaq) here in the U.S., which would undoubtedly enhance liquidity and institutional shareholder ownership for public-traded cannabis companies.
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