1-31-2021
CANNABIS
‘There’s no stopping the industry now’:
Democratic control is a big win for marijuana
The industry is poised for a big shakeup even though the prospects for passing major changes
to federal policy remain slim.
Curaleaf, America’s largest cannabis company, put over 16 million shares on the market overnight and brought in $300 million — in equity and debt sales — in under 24 hours.
The day after Democrats swept both Senate seats
in the Georgia runoff election — giving them a slim majority and installing pro-marijuana legalization leaders in the upper chamber — Curaleaf Chair Boris Jordan decided to try something big.
“I literally called my bankers and I said, ‘Guys, I think this is going to be a big change. Let's do an [overnight] offering,’” Jordan recalled.
Curaleaf, America’s largest cannabis company, put over 16 million shares on the market overnight and brought in $300 million — in equity and debt sales — in under 24 hours.
Sales are already booming. Cannabis sales hit $20 billion last year — a 50 percent jump over 2019. Legalization continues to spread across the country, with more than one-third of Americans now living in states where marijuana is fully legal.
“There's no stopping the industry now,” said Andrew Kline, who recently joined the law firm Perkins Coie after serving as public policy director for the National Cannabis Industry Association.
“The bigger players are going to be interested in acquiring smaller companies and becoming multi-state operators or expanding their footprint in different states.”
What’s happened so far?
A flurry of deals and capital raises have been made in recent weeks, in addition to Curaleaf cashing in.
Cannabis behemoth Cresco Labs recently bought Bluma Wellness for $213 million, giving it a beachhead in the booming Florida market. There are now more than 450,000 medical marijuana patients in Florida — a more than 50 percent increase in the last year — and 310 dispensaries across the state, nearly 100 more than at the start of 2020.
“I think you're gonna see a lot of [mergers and acquisitions] coming,” said Bluma Wellness CEO Brady Cobb, who will join Cresco immediately and focus on building its Florida business. “It's going to be driven by the fact that institutional capital sees light at the end of the tunnel for these companies.”
Cresco also recently announced it will raise $125 million from investors, citing plans to accelerate its growth. The company was already soaring ahead of the political shifts: It had third-quarter revenues of $153 million — more than four times as much as during the comparable period in 2019.
Senate Minority Leader Chuck Schumer takes off his mask as he arrives to speak to reporters on Capitol Hill in Washington.
Canadian companies also are eyeing the U.S. market. Cannabis giant Canopy Growth Corp. recently announced a deal — contingent on U.S. legalization — to acquire a big stake in TerrAscend, which has operations in California, Pennsylvania and New Jersey.
The deal is similar to Canopy’s arrangement to buy Acreage Holdings, which has 71 dispensaries and operations in 15 states, if marijuana restrictions in the U.S. are lifted.
Stock prices for some of the biggest cannabis companies have skyrocketed in recent weeks. Acreage’s stock price has nearly doubled since Democrats won control of the Senate, while the price of Cresco’s shares have jumped by more than 30 percent.
“People are scrambling right now, and they're taking a calculated risk that federal change is going to happen in the near term,” Kline said.
What’s the reality on Capitol Hill?
Despite the ebullient feelings among industry advocates and investors, the likelihood that Congress will make big changes to federal marijuana restrictions remains slim. That’s in large part because Democrats will have a razor-thin majority and need 60 votes to pass most legislation.
No stopping the states
The legalization boom continues to spread across the country. Voters in Arizona, New Jersey, Montana and South Dakota approved ballot measures to legalize, tax and regulate recreational marijuana in November. Altogether, that means 18 million more Americans now live in states where the drug is fully legal.
State legislatures across the country are eyeing legalization too, at least in part because of big budget deficits caused by the pandemic. New York, Virginia, Connecticut and New Mexico are among the states where there will be strong pushes to pass recreational legalization bills in the coming weeks.
Even relatively mature markets saw huge growth in 2020, fueled by anxious Americans stuck in their homes smoking more weed. Sales in Colorado topped $2 billion for the first time, while Oregon saw a 40 percent spike in revenues.
“Companies are doubling [and] tripling in size so that they can keep up with demand,” Trulieve CEO Kim Rivers said. Trulieve is the biggest player in Florida’s medical marijuana market, with a growing footprint around the country.
“At the end of the day, there's still incredible opportunity, even if that doesn't immediately translate into full federal legalization.”
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