You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
The American cannabis industry is ending 2020 on a high note, with strong growth, easier access to equity and debt capital and expanding opportunities as more states legalize. There are now 9 multi-state operators with market caps above $1 billion, with more on the way through newly public companies that will begin trading in Q1. Investors are excited by the growth, and we are already seeing several companies use M&A to supplement strong organic growth. Some recent examples include Jushi Holdings, Trulieve and Ayr Strategies making acquisitions in Pennsylvania, Ayr Strategies also entering Ohio and Arizona through acquisitions, TerrAscend entering the Maryland market with an acquisition and Verano Holdings acquiring AltMed, with operations in Arizona and Florida, ahead of going public.
The cannabis industry has seen some big acquisitions to date, most recently the purchase of Grassroots Cannabis by Curaleaf, but we don’t expect the deals ahead to involve larger MSOs combining. Instead, we anticipate that the larger MSOs will get bigger by purchasing assets within their existing states of operation, where possible, or enter new states by purchasing private operators. Doing a large multi-state acquisition is challenging in the cannabis industry, as many states cap the number of licenses an operator can hold, sometimes at just one. The American cannabis industry remains highly fragmented, and we see consolidation ahead.
One state that we think is likely to be the hottest is California. The market was slow to develop, but it has had solid growth over the past several months. Looking ahead, retail store openings and the expansion of delivery services are likely to drive further growth. The pace of M&A has already accelerated. Cresco Labs acquired Origin House in early 2020, and, more recently, Columbia Care closed the acquisition of Project Cannabis. The pending merger of Caliva and Left Coast Ventures into the Subversive Capital Acquisition SPAC, a deal that is expected to close in January, could inspire other large MSOs, largely absent from the market, to get involved. One that comes to mind is Curaleaf. Its incoming CEO, Joseph Bayern, essentially said so in a recent interview with New Cannabis Ventures. Green Thumb Industries, which has a small presence in California but has been cautious thus far, could get more aggressive in 2021.
New York is another market that could see some activity. Most of the largest MSOs by market cap are in the state, with the glaring exceptions of TerrAscend, which is based there, and Trulieve, which has commenced a Northeast operation. With the state likely to go legal, creating what would be the second largest market in the country, it would seem like a priority for any large MSO.
Colorado, which until recently didn’t allow public companies to hold licenses, is another market that could see M&A. Columbia Care acquired one of the largest operators in the state, The Green Solution, and there are several large operators that could go public and then expand into other states or choose to merge with an existing operator.
Most of the largest MSOs have operations in Florida, but Cresco Labs, which had a pending merger in 2019, as well as TerrAscend aren’t in the state. Other large operators that could enter the state could include Jushi Holdings and Planet 13 Holdings.
We expect M&A to be one of the biggest stories in 2021. Limited access to capital and depressed stock prices restrained organic expansion and M&A activity over the past couple of years, but the promising industry fundamentals and the improving liquidity in their stocks are likely to inspire the leading cannabis operators to buy assets.
For in-depth insights and analysis into the publicly-traded cannabis industry, there is no better source than Alan Brochstein’s 420 Investor premium service. Join the only due diligence platform trusted by cannabis investors for over 7 years.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.
Get ahead of the crowd! If you are a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Gain immediate access to real-time and in-depth information and market intelligence about the publicly traded cannabis sector, including daily videos, weekly chats, model portfolios, a community forum and much more.
Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index.
Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.
Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.
Alan & Joel