Colorado Cannabis Consolidation Commences

This is a copy of the June 9th edition of our weekly Newsletter, which we have been publishing since October 2015.

Friends,

In late May, Governor Polis of Colorado signed legislation that will have important implications for the cannabis industry. In November, the law becomes effective that will enable public companies to own licenses in the state. The actual implementation won’t take place until early 2020, as the state still needs to issue final rules.

Colorado is a mature market with some leading brands, and many companies are generating not only large revenue but also profits. This will appeal to some multi-state operators (MSOs), especially those looking to be the biggest operators.

So far, the public company activity has been limited, which isn’t surprising given the lag to implementation, but we hear there are several MSOs beginning the due diligence process. It is likely that some of the companies will look to sell, but we wouldn’t be surprised to see some decide to go public themselves once able to do so.

This week, Medicine Man Technologies, which already had lined up the acquisition of related party Medicine Man, announced two pending transactions in the state, with the deals totaling $18 million in cash and stock. General Cannabis also announced a pending $2.1 million acquisition. iAnthus will now be able to recognize revenue from Organix in Breckenridge, and we expect MJardin will be able to purchase some of the companies for which it manages operations. SLANG Worldwide recently said it is likely to exercise its option to buy its partners in Colorado, and it seems reasonable to expect Dixie Brands to do so as well.

It will be quite interesting to see which MSOs pursue Colorado aggressively, as the dynamics of this mature market are quite different than the highly regulated and limited license states in the East or even California, which has a lot of runway due to the recent regulatory implementation there. Revenue and profits in the near term could be valuable, and there are some branding opportunities as well, but the growth of the market is very limited. We will be watching the multiples to sales on any transactions and listening to the deal rationales, as cost savings associated with consolidation are likely going to drive the financial results.


To learn more about Medicine Man Technologies, a client of New Cannabis Ventures, visit the company’s Investor Dashboard that we maintain on its behalf and click the blue Follow Company button in order to stay up to date with their progress.


New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


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Sincerely,

Alan & Joel

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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