The company’s payday hints at how the entire cannabis industry is poised for growth and consolidation as the Democrats take full control of the federal government. Companies position themselves for the greater likelihood that federal cannabis restrictions will be significantly relaxed.
Sales are already booming. Cannabis sales were $ 20 billion last year – a 50 percent increase from 2019. Legalization continues to spread across the country. More than a third of Americans today live in states where marijuana is completely legal.
“There’s no stopping the industry right now,” said Andrew Kline, who recently joined the Perkins Coie law firm after serving as public policy director for the National Cannabis Industry Association. “The larger companies will be interested in acquiring smaller companies and operating in multiple states or expanding their presence in different states.”
What has happened so far?
In addition to the redemption of Curaleaf, numerous deals and capital increases have been carried out in recent weeks.
The cannabis monster Cresco Labs recently bought Bluma Wellness for $ 213 million, giving it a bridgehead in the booming Florida market. There are now more than 450,000 medical marijuana patients in Florida – up more than 50 percent last year – and 310 pharmacies across the state, nearly 100 more than at the beginning of 2020.
“I think you will see a lot [mergers and acquisitions] “said Brady Cobb, CEO of Bluma Wellness, who is joining Cresco immediately and is focused on building his business in Florida. “It is driven by the fact that institutional capital for these companies sees light at the end of the tunnel.”
Cresco too recently announced It will raise $ 125 million from investors and lead plans to accelerate its growth. The company was already one step ahead of the political changes: It posted revenue of $ 153 million in the third quarter – more than four times as much as in the same period in 2019.
Canadian companies are also watching the US market. Cannabis giant Canopy Growth Corp. recently announced a US legalization pending deal to acquire a large stake in TerrAscend, which operates in California, Pennsylvania and New Jersey.
The deal is similar to Canopy’s agreement to buy Acreage Holdings with 71 pharmacies and operations in 15 states when US marijuana restrictions are lifted.
The share prices of some of the largest cannabis companies have skyrocketed in the past few weeks. Acreage’s stock price has nearly doubled since the Democrats took control of the Senate, while Cresco’s stock has surged more than 30 percent.
“People are crawling right now and taking a calculated risk that a federal change will take place in the near future,” said Kline.
What is the Reality on Capitol Hill?
Despite the lively sentiment among supporters and investors in the industry, the likelihood remains slim that Congress will make major changes to federal marijuana restrictions. This is in large part because Democrats have a wafer-thin majority and need 60 votes to pass most of the laws.
Because of this, many in the weed industry have banking legislation in their sights in the new Congress, despite Parliament passing the MORE bill in the last Congress that would decriminalize cannabis at the federal level and clear records. The SAFE Banking Act, which would make it easier for banks to provide financial services to the cannabis industry, was passed in 2019 with broad support from both parties, but went nowhere in the GOP-controlled Senate.
With Democrats now running both houses, industry insiders and policy-makers believe banking has a good chance of becoming law – and a much better chance than sweeping legislation to legalize it. Even the new member of the Senate Committee on Banking, Housing, and Urban Affairs, GOP Senator Pat Toomey of Pennsylvania, said he was open to discussion on the matter.
“We’re not going to get full legalization from this Senate,” said John Hudak, cannabis policy expert at The Brookings Institution.
Hudak isn’t surprised, however, by the surge in cannabis stocks after the Georgia runoff election.
“In the business world, there’s a real problem with not working with people who really understand how federal legislation works,” said Hudak. “And there is also a serious problem with lobbyists and other political misconduct in selling these companies a really bad cart.”
Despite the post-election stock market jump and Curaleaf’s own fundraising success, Jordan said he agreed with Hudak’s overall rating. He doesn’t think marijuana legalization is likely to pass this Congress, and his business decisions are still more motivated by changes in state policy.
“We’re making very big bets,” said Jordan. “Not based on federal legal changes, but based on what the population sees at the ballot box.”
No stopping the states
The legalization boom continues to spread across the country. Voters in Arizona, New Jersey, Montana and South Dakota approved election measures to legalize, tax and regulate recreational marijuana in November. In total, that means 18 million more Americans live in states where the drug is completely legal.
State legislatures across the country are also seeking legalization, at least in part due to the large budget deficits caused by the pandemic. New York, Virginia, Connecticut, and New Mexico are among the states where heavy efforts will be made in the coming weeks to pass laws legalizing recreational activities.
Even relatively mature markets saw tremendous growth in 2020, fueled by anxious Americans stuck in their homes smoking more weed. Sales in Colorado over $ 2 billion for the first time while Oregon saw one 40 percent top in revenue.
“Companies are doubling [and] Triple the size to keep up with demand, ”said Kim Rivers, Trulieve CEO. Trulieve is the largest medical marijuana company in the Florida market and has a growing presence across the country. “Ultimately, there are still incredible opportunities even if it doesn’t immediately lead to full federal legalization.”