How Investing In Cannabis Almost Took Down Scotts Miracle-Gro

The gardening giant bet $1.7 billion on lighting, nutrients and other pot cultivation tools—and lost. But CEO Jim Hagedorn and his son Chris are plotting a comeback. Here’s how they plan to smoke the competition.

Back in 2015, when only four states—Alaska, Colorado, Oregon and Washington—had legalized recreational marijuana, Hawthorne started spending hundreds of millions acquiring companies like General Hydroponics (for $120 million), a Santa Rosa-based indoor gardening supply company, to get into the marijuana industry’s ancillary market.

The move helped the Hagedorns grab glossy magazine headlines and Scotts’ stock price started to rise from the mid-$50 range to above $60 a share. By May 2021, the company acquired more cannabis-focused companies like Luxx Lighting (purchased for $213.2 million), a grow-light company started by the founders of respected weed brand Jungle Boys, and brokered a $150 million convertible debt deal with Canadian cannabis investment vehicle RIV Capital. Scotts’ stock bloomed to a robust $244.

Read the full story on Forbes: https://www.forbes.com/sites/willyakowicz/2024/01/12/scotts-miracle-gro-cannabis-1-7-billion-dollars-hawthorne-james-hagedorn-chris-hagedorn/?sh=1027de5013bf

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here’s your Forbes daily briefing for Monday January 15th today on Forbes weed kills how investing in cannabis almost took down Scott’s Miracle Grow it’s a beautiful chilly November day in Las Vegas and Jim Hagadorn the CEO president and chairman of Ohio based Lawn Care giant Scotts Miracle Grow is pissed off scott spent $1.7 billion building pot focused subsidiary Hawthorne gardening company and acquiring grow light manufacturers Hydroponic Supply outfits plant nutrient makers and other cannabis cultivation supply companies but after nearly a decade of making a series of audacious bets on the legal cannabis industry Hagadorn admits the venture has been an abject failure inside his company’s booth at MJ biscon the largest annual cannabis industry Expo held at the Las Vegas Convention Center Hagadorn throws a booklet of Rolling Papers across the table to make a point referring to Hawthorne which is run by his 39-year-old son Chris the 68-year-old hagador says quote this is what our Equity is worth the notoriously foulmouthed former F-16 fighter pilot who named his private jet F bomb continues quote when we started making Acquisitions in the Cannabis industry it felt righteous as [ __ ] back in 2015 when only four states alas Colorado Oregon and Washington had legalized recreational marijuana Hawthorne started spending hundreds of millions acquiring companies like General Hydroponics for $120 million a Santa Rosa based indoor gardening supply company to get into the marijuana industry’s ancillary Market the move helped the Hagadorn grab glossy magazine headlines and Scott stock price started to rise from the mid 50 range to above $60 a share by May 2021 the company acquired more more cannabis focused companies like Lux lighting purchased for $23.2 million grow light company started by the founders of respected weed brand jungle boys the company also brokered a $150 million convertible debt deal with Canadian cannabis investment vehicle Riv Capital Scott’s stock Bloom to a robust $244 but thanks to the marijuana industry’s prolonged recession driven by the over supply of cannabis a crashing wholesale price per pound of weed a punitive federal tax code applied to cannabis companies a lack of movement at the federal level to legalize marijuana and sales at Scots dropping from $4.9 billion in 2021 to 3.5 billion in 2023 Scott share price cratered 75% from its high 2 years ago Hawthorne which saw its sales decrease by nearly 35% from 2022 to 2023 and posted a net loss of $48 million for the year had to terminate 1,000 employees from its 1,300 person staff and shuttered Lux lighting after disposing of $200 million worth of unsold inventory in a landfill Hagadorn says that the company is now worth quote zero or less Hagadorn wearing a National Rifle Association hat emblazoned with a don’t tread on me logo says quote look pot almost took us down bring up Scots in front of cannabis investors and the laugh and Hur insults like how the hagador are quote effing morons or quote arrogant idiots for blowing through $1.7 billion but the Father and Son team are smart and humble enough to roll with the abuse during a November 2023 earnings call agor said quote you can throw [ __ ] at us we deserve it however they have a plan to spin out Hawthorne from Scots an announcement that helped the stock jump 8% in a day hagador says that ultimately the the goal is to create the Proctor and Gamble of marijuana without a whiff of irony by selling Hawthorne to a publicly traded cannabis company like cure Leaf true Lea Green Thumb Industries or verono none of these companies commented to Forbes about a potential deal it’s not that Hawthorne which owns more than 20 companies that make everything a farmer needs to grow designer indoor marijuana from lighting to nutrients doesn’t have value Matt G Scott’s CFO concedes that Hawthorne is a quote the trctor to Scott’s overall valuation but looking towards the future he says quote there’s a lot of value for full coverage check out will yakowitz his piece on forbes.com this is Kieran Meadows from Forbes thanks for tuning [Music] in