Earlier this month, I had the opportunity to sit in on a presentation by and meet the management of CEA Industries, which is based in Louisville CO. CEA became a public company in 2011. Back then, it was exclusively a provider of controlled environment agricultural solutions through its subsidiary, Surna Cultivation Technologies LLC, with a focus on the cannabis market. The market for its products was hot, but competition stiffened. The stock fell from a high of $72.75 in January 2018 to a low of just over $0.50 in June 2024 when it completed a 1-for-12 reverse split. At this time, the stock trades around $8.70 per share with a market cap of $7.3 million.
CEA has downsized Surna’s operations substantially, focusing primarily on equipment sales, and no longer views the business’s long-term opportunities as attractive (even though it is having a pretty good year, this year). For that reason, the company has turned its attention to other growth opportunities. Earlier this month, it completed the acquisition of Fat Panda, one of the largest Canadian retailers of vaping products with 33 stores located in Manitoba, Alberta and Saskatchewan and an e-commerce platform. Fat Panda opened its first store in Winnipeg in 2013, generating sales of C$2 million that year. CEA reports that Fat Panda had 2024 revenues of C$38 million, up 14%, and adjusted EBITDA of C$8 million. The acquisition price was C$18 million, paid with C$13.9 million of cash (financed with a bridge note financing), C$0.7 million of CEA Industries stock and $2.06 million in seller notes. Justin Vedoya, one of the founders of Fat Panda, and his management team will remain with the company. After completing the acquisition, CEA changed its ticker symbol to VAPE.
CEA aims to grow the business aggressively by opening new stores and pursuing bolt-on acquisitions to roll-up this fragmented industry in Canada and perhaps eventually move into the U.S. It sees good growth potential through Fat Panda’s ecommerce platform. CEA will also focus on improving Fat Panda’s overall operating efficiency. It views regulatory oversight in Canada as stable and supportive. The company believes that it has access to sufficient capital through the public markets to grow the business and may issue stock in an at-the-market offering to repay the bridge note later this year. At this time, I am offering no investment recommendation on VAPE shares, as the financial information around the acquisition is sketchy and management has not offered guidance about the company’s future performance. In calendar 2024, CEA Industries posted a loss of $3.1 million or $4.22 per share on revenue of $2.8 million. In 2023, it posted a slightly smaller loss of $2.9 million or $4.33 per share on revenue of $6.91 million. I plan to monitor the company’s progress and report on it from time to time, as warranted.
June 23, 2025
Stephen P. Percoco
Lark Research
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