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Consolidation is the spin word for "change the picture with more noise and no profits." Cheer for the losers.

Larger, more well-financed players were able to acquire smaller companies as the land grab frenzy heats up. Key end of year consolidations included MedMen's (MMNFF) acquisition of Pharmacann and the combination of iAnthus (ITHUF) and MPX Bioceuticals (MPXEF) . The latest announcement between Green Growth Brands and Aphria (APHA) has generated a heated discussion as to whether the proposed hostile bid is serious. Multi-state operators (MSO) are rushing to plant flags in as many states as possible in order to claim to be the company with the largest footprint. There will certainly be more moves as the larger MSO's identify smaller, single state operators to add to their growing portfolios. It's difficult to keep track of the how the MSO's rank as the picture keeps changing. There are many planned mergers that haven't actually closed. Some mergers are announced to great fanfare and when they don't close, they just quietly end with little announcement.

Top Five MSO's

Acreage Holdings ACRZF 19 states; holds licenses to cultivate, extract/process, and/or sell medical and adult use cannabis in 19 states. Market Capitalization $961 million. Curaleaf (CURLF) 12 states; 35 dispensaries, 12 cultivation cites and 10 processing sites. Market Capitalization $2.9 billion MedMen/Pharmacann (MMNFF) 12 states; licenses for 76 retail locations and 16 cultivation and production facilities. Market Capitalization $1.8 billion iAnthus/MPX Bioceuticals (IAN.CN) 10 states, 56 retail locations and 14 cultivation/processing facilities $400 million Green Thumb Industries (GTBIF)

9 states9 manufacturing facilities & 61 retail locations Market capitalization $ 1.6 billion. These industry leaders will undoubtedly strike more deals this year. It is inevitable that national brands will develop despite the federal government's resistance. The market capitalizations 1/ are too high in relationship to earns potential. If these companies continue to operate inefficiently, they will not be the cannabis leaders for the future.

1/ Market capitalization refers to the total dollar market value of a company's outstanding shares. Commonly referred to as "market cap," it is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to using sales or total asset figures. An overvalued market capitalization has a current value that is not justified by its earnings outlook or price-earnings (P/E) ratio. Overvaluation in cannabis stocks result from an uptick in emotional trading, which inflates the stock's market price, or from a deterioration in a company's financial strength. Potential investors do not want to overpay for a stock, but they are when the word "cannabis" is tied to the play.

Hemp has traction Hemp was legalized late in the year as the 2018 Farm Bill was signed into law, so 2019 is the year that the results will be felt. The market can expect to see a surge in hemp related products. Farmers have the comfort of knowing they are protected if they choose to grow hemp crops. Plus, they can get crop insurance. Expect to see more states' farmers switching to hemp and away from less hardy and more expensive crops. While hemp-derived cannabidiol or CBD products still need to receive FDA approval, that hasn't stopped the flood of new CBD products on the market. The problem is that consumers are confused as to which CBD products are effective. Some have little CBD and some only claim to have CBD. Products with high levels of CBD that are meant for medical patients will still be regulated as medical drugs. Then dispensaries sell CBD products with small amounts of THC. The next year will be one of education as consumers will be forced to do their homework and CBD companies will fighting for attention.

The Northeast Will Rise First it was Colorado, then all the buzz was about California. The northeast part of the country, normally the most progressive when it comes to healthcare, seemed to lad the rest of the nation with regards to medical marijuana. Perhaps the Puritan origins were holding back these states? While Vermont, Maine and Massachusetts are fully legal, the dispensary landscape is still very limited. Vermont allows no legal commercial sales, Maine continues to only have medical marijuana dispensaries and Massachusetts has only licensed approximately five retail outlets.

New Jersey has slowly expanded its previously restrictive medical marijuana program and with a new governor began the push for adult use cannabis. Establishing an adult use program has taken longer than many people thought, but it continues to wind its way through the states legislators and it looks promising for 2019. The New Jersey Policy Perspective and the ACLU of New Jersey conducted a study that determined that a legal marijuana market for adults in the state could generate at least over $300 million in tax revenues. New York's Governor Andrew Cuomo had once called marijuana a gateway drug, but now he sees it as a gateway to paying for improvements in the state's budget. The legislature in New York flipped to a Democratic majority during the midterms and it was pretty clear they would make a move for full legalization. The governor beat them to it and put adult use cannabis in his budget for 2019 and he reiterated It in his inaugural address. Legislation is expected to be ready during the year and the first steps to establishing the program would begin shortly thereafter. While New Yorkers are not considered to be big cannabis consumers, the size of the population makes the market a desirable one.

Capital Raises Money rolled into cannabis during 2018 and easily outpaced 2017. As of the end of November, according to Viridian Capital Advisors, 557 deals raised over $13.5 billion in 2018. In 2017, there were 378 deals that raised $2.7 billion. Numerous capital companies are establishing funds to raise even more money. Small to large investors all want to invest in cannabis companies even as cannabis stocks have slumped. For example, the Horizons Marijuana Life Sciences ETF has fallen 46% since hitting its yearly high in October. 2019 will easily top the previous year for capital raised for cannabis companies. However, with consolidation there will be fewer premium companies to fund and investors will find it harder to hit the big winners.

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