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Attracting Investment: How Cannabis Companies Can Best Position Themselves

By Joe Madigan
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Remember those heady days of the Green Rush a decade ago, when markets were small and it seemed everyone had a chance? Now it’s more of a mad rush to get some green in the form of investment capital.

The majority of states in the country now have some type of legal cannabis market. Businesses in those states operate in spite of regulations that are restrictive, confusing and make it very difficult to make a profit. Meanwhile, heavy tax burdens, differences in enforcement techniques and varying degrees of oversight are other factors that influence bottom lines in the cannabis industry.

Saturated markets are giving businesses trouble when it comes to their bottom line

Inflation also continues to be a prominent force across world markets. Sales of cannabis products have fallen as consumers adjust to inflation and post-COVID supply chain issues that are causing higher prices on necessary staples like food and gas. An oversaturation of cannabis flower is becoming a perennial problem in some states and another factor causing industry distress.

When cash flow slows to a trickle, companies of all sizes seek out investment funding to keep their momentum. But catching the eye of an investor group requires more than just sticking your hand out.

What Attracts Potential Investors?

A company is best positioned to attract those interested in cannabis investment opportunities when it appears serious about its growth plans. That means being well positioned with a solid upper-management foundation and so much the better if there’s an advisory board in place too. A company built with a diverse group of talent—ideally from consumer packaged goods companies—presents an attractive opportunity for investors.

Talent from the CPG space can help attract investors

Top-quality and industry savvy finance employees who maintain sound financial books and establish a solid banking arrangement are also important. If the company’s financial scenario is robust enough to provide confidence in case of an audit and the books are in good shape with auditable METRC logs investors will be far more inclined to put money on the line.

A cannabis company with full inclusion (or seed to sale) is often a smart choice for investment. The vertical integration of cultivation, processing/manufacturing and retail allows them to sell their own products while also stocking other brands’ products on the floors of their dispensaries. If their products are respected and the brand is held in high regard, even better. Similarly, a cultivation enterprise that can grow crops for multiple brands can also be very attractive. The ability to pivot and adjust production to reflect the market and consumer demands indicates a strong business foundation.

Despite the current headwinds and saturated markets, other chances for growth exist. When a local municipality finally decides to “opt-in” to adult-use cannabis sales, there’s opportunity for both established brands and startups. It’s a matter of being ready for those opportunities and having a plan to leap in whenever new licenses become available.

What Businesses Will Struggle to Attract Investment?

Culture is key here. Poor employee relations and weak cohesion across departments are indicative of deeper problems. Do people actually want to work for the business? Do they feel supported by human resources? A company with underdeveloped or non-existent workers’ compensation policies and a management team that is not respected by its employees is not going to look good in the eyes of potential investors.

Non-diversified cannabis businesses are also at a major disadvantage when seeking investors. Cultivators of one type of product or service are locked into a single operation geared to do one thing. Any changes to market whims or problems with the supply chain can wreak havoc on a business based around a single product.

Stick to Business Basics

The cannabis industry is unique, but the basics of running a business well enough for success still apply. Strictly adhering to the traditional methods that any successful organization follows is extra important in cannabis. Businesses that are active in their community and make a real effort to be involved will be held in higher regard by investors. They want to see cannabis businesses that are not just setting up shop to make a quick buck, but are dedicated to bettering their community. That indicates a relationship with customers that involves mutual respect and promotes business longevity and financial stability.

Cannabis M&A: Take Care of the Due Diligence Essentials

By Michael G. Lux
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As the regulated cannabis industry matures, M&A activity is expected to continue accelerating. Whether they are existing licensed businesses looking for acquisition opportunities or new investor groups seeking to enter or expand their positions in the industry, investors should recognize the special due diligence challenges associated with cannabis industry transactions.

Above all, investors should avoid the temptation to omit or short-circuit long-established due diligence practices, mistakenly believing that some of these steps might not be relevant to cannabis and hemp operations. Despite the unique nature of the industry, thorough and professional financial, tax and legal due diligence are essential to a successful acquisition.

Surging M&A activity

Over the past few years, as the cannabis industry matured and the regulatory environment evolved, M&A activity involving cannabis and hemp companies has undergone several cycles of expansion and contraction. Today, the expansion trend clearly has resumed. Although the exact numbers vary from one source to another, virtually all industry observers agree that 2021 saw a strong resurgence in cannabis-related M&A activity, with total transactions numbering in the hundreds and total deal values reaching into billions of dollars. Moreover, most analysts seem to agree that so far, the pace for 2022 is accelerating even more.

Today, many existing cannabis and hemp multistate operating companies are in an acquisitive mood as they look for opportunities to scale up their operations, enter new markets, and vertically integrate. At the same time, the projections for continued industry growth over the next decade have attracted a number of investment funds and private equity groups, which were formed specifically for the purpose of investing in cannabis and hemp businesses.

These two classes of investors often pursue distinctly different approaches to their transactions. Unlike the largely entrepreneurial cannabis industry pioneers now looking to expand, the more institutional investors are accustomed to working with professional advisers to perform financial, tax and legal due diligence as they would for a transaction in any other industry.

Among both groups, however, there is sometimes a tendency to misunderstand some of the transactional risk elements associated with cannabis M&A deals. In many instances, buyers who are generally sensitive to potential legal and regulatory risks will underestimate or overlook other risks they also should examine as part of a more conventional financial and tax due diligence effort.

For example, since much of the value of a licensed cannabis operation is the license itself, investors often rely largely on their own industry understanding and expertise to assess the merits of a proposed acquisition, based primarily on their estimation of the license’s value. This practice provides acquirers with a narrow and incomplete view of the deal’s overall value. More importantly, it also overlooks significant areas of risk.

Because cannabis acquisition targets typically are still quite new and have no consistent earning records, acquirers also sometimes eschew quality of earnings studies and other elements of conventional due diligence that are designed to assess the accuracy of historical earnings and the feasibility of future projections.

Such assumptions and oversights often can derail an otherwise promising transaction prior to closing, causing both the target and the acquirer to incur unnecessary costs and lost opportunities. What’s more, even if the deal is eventually consummated, short-circuiting the normal due diligence processes can expose buyers to significant unanticipated risk down the road.

Recurring issues in cannabis acquisitions

The most widely recognized risks in the industry stem from the conflict between federal law and the laws of various states that have legalized cannabis for medical or adult recreational use. The most prominent of these concerns relates to Section 280E of the Internal Revenue Code (IRC 280E).

Although its use is now legal in many states, cannabis is still classified as a Schedule I substance under the federal Controlled Substances Act. IRC 280E states that any trade or business trafficking in a controlled substance must pay income tax based on its gross income, rather than net income after deductions. As a result, cannabis businesses are not entitled to any of the common expense deductions or tax credits other businesses can claim.

The practical effect of this situation is that cannabis-related businesses – including growers, processors, shippers and retailers – often owe significant federal income tax even if they are not yet profitable. Everyone active in the industry is aware of the issue, of course, and any existing operating company or investment group will undoubtedly factor this risk into its assessment of a proposed acquisition target.

The challenge can be exacerbated, however, by other, less widely discussed factors that also affect many cannabis businesses. These issues further cloud the financial, tax and regulatory risk picture, making thorough and professional due diligence even more critical to a successful acquisition.

Several of these issues merit special attention:

  • Nonstandard accounting and financial reporting practices. As is often the case in relatively young, still-maturing businesses, acquisition targets in the cannabis industry might not have yet developed highly sophisticated accounting operations. It is not uncommon to encounter inadequate accounting department staffing along with financial reporting procedures that do not align with either generally accepted accounting principles or other standard practices. In many instances, company management is still preparing its own financial statements with minimal outside guidance or involvement by objective, third-party professionals. Significant turnover in the management team – and particularly in the chief financial officer position –is also common, as is a general view that accounting is a cost center rather than a value-enhancing part of the management structure.

Such conditions are not unusual in young businesses that are still largely entrepreneurial in spirit and practice. In the cannabis industry, however, this situation is also a reflection of many professional and business services firms’ longstanding reluctance to engage with cannabis operators – a hesitancy that still affects some organizations.

When customary business practices are not applied or are applied inconsistently, acquiring companies or investors should be prepared to devote more time and attention – not less – to conventional financial due diligence. The expertise of professional advisers with direct experience in the industry can be of immense benefit to all parties in this effort.

  • Restructuring events or nonrecurring items in financial statements. Restructuring events and nonrecurring items are relatively common in many new or fast-growing businesses, and they are especially prevalent among cannabis operations. In many instances, such companies have engaged in multiple restructuring events over a short period of time, often consolidating operations, taking on new debt, and incurring various one-time costs that are not directly related to the ongoing operations of the business.

The inclusion of various nonrecurring items within the historical financial statements can make it much more difficult for a buyer or investor to accurately identify and assess proforma operating results, especially in businesses that have not yet generated consistent profits. Here again, applying previous experience in clearing up the noise in the financial statements can help improve both the accuracy and timeliness of the due diligence effort.

  • Run-rate results inconsistent with historical earnings or losses. A company’s run rate – an extraction of current financial information as a predictor of future performance – is a widely used tool for creating performance estimates for companies that have been operating for short periods of time or that have only recently become profitable. In cannabis businesses, however, run-rate estimates sometimes can be unreliable or misleading.

Because it is based only on the most current data, the run rate often does not reflect significant past events that could skew projections or recent changes in the company’s fundamental business operations. Because such occurrences are relatively common in the industry, the results of run-rate calculations can be inconsistent with the target company’s historical record of earnings or losses.

  • Historical tax and structuring risks new owners must assume. Like many other new businesses, cannabis operations often face cash flow and financing challenges, which owners can address through alternative strategies such as debt financing, stock warrants, or preferred equity conversions. Such approaches can give rise to complex tax and financial reporting issues as tax authorities exercise their judgment in interpreting whether these items should be reported as liabilities or equity derivatives. The situation is often complicated further by various nonstandard business practices and the absence of sophisticated accounting capabilities, as noted earlier.

As a consequence, financial statements for many cannabis companies – including a number of publicly listed companies – often contain complex capital structures with numerous types of debt warrants, conversion factors and share ownership options. Although an acquisition would, in theory, clean up these complications, buyers nevertheless must factor in the risk of previous noncompliance that might still be hidden within the organization – a risk that can be identified and quantified only through competent and thorough due diligence.

Not as simple as it seems

On the surface, the fundamentals of the cannabis industry are relatively straightforward, which is one reason it appeals to both operators and investors. For example, participants at every stage of the cannabis business cycle – growing and harvesting, processing and packaging, shipping and distribution, and ultimately marketing and retailing – can readily apply well-established practices from their counterparts in more conventional product lines.

The major exception to this rule, of course, is the area of regulatory compliance, which is still shifting and likely will continue to do so for the foreseeable future. Outside of this obvious and significant exception, however, most other aspects of the industry are relatively predictable and manageable.

When viewed in this light and in light of the continued growth of the industry, it is easy to see why cannabis-related acquisitions are so appealing to existing business operators and outside investors alike. It is also easy to understand why buyers might feel pressure to move quickly to take advantage of promising opportunities in a fast-changing industry.

As attractive as such opportunities might be, however, buyers should take care to avoid shortcuts and resist the urge to sidestep established due diligence procedures that can reveal potential accounting and financial statement complications and the related compliance risks they create. The unique nature of the cannabis industry does not make these practices irrelevant or unnecessary. If anything, it makes professional financial, tax, and legal due diligence more important than ever.


Crowe Disclaimer: Qualified organizations only. Independence and regulatory restrictions may apply. Some firm services may not be available to all clients. Given the continued evolution and inconsistency of various state and federal cannabis-related laws, any company should seek competent legal advice relating to its involvement in the cannabis industry, including when considering a potential public offering as a cannabis-related company.

Cannin Commentary

Why Should You Add Columbia Care to Your Cannabis Portfolio?

By Cannabis Industry Journal Staff
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Investors looking to gain exposure to the cannabis space have several options given the increase in the number of cannabis producers in the past decade, the recent wave of legalization in the U.S. and a rapidly expanding addressable market. However, one undervalued cannabis stock with enticing growth prospects that remains a top buy today is Columbia Care (OTC: CCHWF). Let’s see why we are bullish on the large-cap multi-state operator right now.

What is Columbia Care?

Columbia Care is one of the largest cannabis producers in the world with 31 manufacturing and cultivation facilities. It has 99 dispensary locations in the U.S. with more than two million square feet of cultivation capacity and over 300 acres of outdoor cultivation capacity.

The company’s rapid expansion over the last few years has allowed Columbia Care to increase sales from $77.45 million in 2019 to $179 million in 2020. Wall Street expects sales to more than triple to $626 million this year and grow by another 55% to $970 million in 2022. In case Columbia Care manages to meet analyst estimates, the company would have grown its revenue at an annual rate of 132% between 2019 and 2022.

While several of Columbia Care’s peers, especially in Canada, are grappling with negative margins, this cannabis company is racing towards profitability. It has already narrowed its operating losses from $81 million in 2019 to $31.5 million in the last 12-months. Analysts expect its bottom-line to improve from a loss per share of $0.48 in 2020 to earnings of $0.27 per share in 2022.

We can see that Columbia Care is valued at a forward price to 2022 sales multiple of less than 2x given its market cap of $1.15 billion. Its price to earnings multiple is also quite attractive at 11.8x. 

What’s Next for Columbia Care Investors?

Columbia Care has a strong presence in markets such as Virginia, Ohio and Pennsylvania that provide limited licenses to cannabis producers. This allows Columbia Care to improve customer engagement and ensure repeat purchases of its products.

In the second quarter of 2021, it increased revenue by 232% year over year to $110 million. Its adjusted EBITDA also rose to $16 million, compared to a loss of $4.7 million in the prior-year period.

Columbia Care acquired Medicine Man for $42 million.

Now, Columbia Care has shifted focus to larger cannabis markets including New York, Arizona, Columbia and New Jersey. In Q2, its sales in Arizona and Illinois rose by 23% and 15% respectively, on a sequential basis.

The cannabis heavyweight recently completed the acquisition of Medicine Man, a Colorado-based cannabis producer, for $42 million. Columbia Care explained the acquisition will be accretive to its bottom-line and is valued at 4.5x projected EBITDA for 2021.

Columbia Care has improved its gross margins to 42% in Q2, from 36% in the prior-year period. Its operating costs have also fallen from $61 million to $51 million in the last year, making it one of the best cannabis stocks on the market today.

Bottom Line: Why Should You Add Columbia Care to Your Cannabis Portfolio?

Columbia Care expects its total addressable market in licensed U.S. states to reach approximately $31 billion by 2026. In the event that cannabis is legalized at the federal level, this figure will surge significantly higher. Additionally, Columbia Care is well poised to gain traction in the future and leverage existing expertise, as it already has wholesale distribution agreements in 13 operational markets.

Its capital expenditure investments continue to generate returns as the company continues to benefit from economies of scale and higher margins.

Columbia Care stock is currently down about 60% from its 52-week high, providing cannabis investors the opportunity to purchase a quality growth stock at an attractive multiple.

For these reasons, we believe investors should consider adding Columbia Care to their cannabis stock portfolios while it’s still trading at a discount.

Cannin Commentary

3 Cannabis Stocks That Can Gain Over 50% According to Analyst Estimates

By Cannabis Industry Journal Staff
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Welcome to the Cannin Commentary Column. We’re happy to announce our partnership with Cannin Investment Group, a cannabis investment analysis firm. In this new column, we will provide readers with a taste of Cannin’s insights and analysis that they offer to their members. Throughout the new installments of this column, you’ll find articles that will touch on investment tips, trends, predictions, market updates and more.


Companies in the cannabis sector have the potential to increase your wealth at an enviable rate over the upcoming decade. But what are the 3 cannabis stocks that can gain over 50% according to analyst estimates?

The wave of cannabis legalization sweeping through the U.S. right now as well as the prospect of decriminalizing or even legalizing adult-use will be key drivers for licensed producers.

Here, we take a look at three cannabis stocks in Columbia Care, Green Thumb Industries and Cresco Labs that should be on your buying radar right now. Each of these stocks is also trading at a deep discount according to Wall Street estimates, allowing investors to derive market-beating gains in the next year.

Columbia Care

U.S.-based multi-state operator, Columbia Care (OTC: CCHWF) is valued at a market cap of $1.12 billion. The company has already increased revenue from $77.4 million in 2019 to $179 million last year.

Now, Wall Street expects sales to more than triple year over year to $625 million in 2021 and surpass $970 million next year. These stellar growth rates in revenue should allow Columbia Care to improve its bottom-line from a loss per share of $0.48 in 2020 to earnings per share of $0.3.

Columbia Care has a presence in 18 jurisdictions across the U.S. and Europe where it operates 31 cultivation and manufacturing facilities.

The company generated $110 million in revenue in Q2 which was 232% higher than the prior-year period. Columbia Care has 73 active dispensaries and another 26 under development, enabling it to target a rapidly expanding addressable market that is forecast to touch $31.6 billion by 2026.

So, is Columbia Care a cannabis stock that can gain over 50%? Well, analysts tracking Columbia Care stock have a 12-month average price target of $9.38 for the stock which is more than 200% higher than its current trading price.

Green Thumb Industries

A cannabis giant trading 46% below its all-time high, Green Thumb Industries (OTC: GTBIF) is valued at a market cap of $4.4 billion. Headquartered in Illinois, Green Thumb Industries has 13 manufacturing facilities, licenses for 111 retail locations and currently operates in 14 domestic markets.

In the second quarter of 2021, the company’s revenue rose by 85% year over year to $222 million – driven by strong demand in Pennsylvania and Illinois. The Q2 of 2021 was also the fourth consecutive quarter where Green Thumb reported a profit, with a net income of $22 million compared to a loss of $13 million in the prior-year period.

Green Thumb currently has 65 retail stores and just opened a third store in the state of New Jersey which is a market that recently legalized cannabis for adult use. While retail sales in New Jersey are expected to begin next year, Green Thumb’s presence in the medical space will enable the company to gain traction in the highly competitive adult-use cannabis vertical as well.

So, is Green Thumb Industries a cannabis stock that can gain over 50%? Well, analysts expect Green Thumb stock to rise by 95% in the next 12-months given its average price target of $37.54.

Cresco Labs

The final stock on our list is Cresco Labs (OTC: CRLBF), another cannabis heavyweight valued at a market cap of $2.16 billion. A vertically integrated cannabis operator, Cresco Labs currently has 40 dispensaries in 10 states and has grown its sales from $43 million in 2018 to $476 million in 2020.

Most states have a limit on the licenses they are allowed to issue and this barrier to entry allows Cresco and peers to enjoy a competitive advantage in the markets they operate in. Cresco Labs reported revenue of $210 million in Q2, a rise of 123% year over year.

It reported a net profit of $2.7 million in Q2 compared to a loss of $41 million in the prior-year quarter. Cresco expects to generate $1 billion in sales by the end of 2021, making it among the first cannabis companies to reach the milestone.

We believe Cresco is certainly a cannabis stock that can gain 50%. Wall Street expects Cresco Labs stock to gain over 60% compared to its current trading price.

Cannabis M&A in the Post-COVID Era

By Jose Sariego
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After a slow start following a disappointing 2019, M&A in the cannabis space closed 2020 with a bang, with more than $600 million in deals announced immediately following the November elections. Prospects for the New Year are expected to continue the explosive year-end trend with a backlog of nearly $2 billion in deals heading into 2021. The COVID-19 pandemic boosted sales of cannabis products, and election results opening up five new states to legal cannabis use and possible federal regulatory reform are further boosting prospects. Analysts now predict the U.S. cannabis market is poised to double by 2025.

Growth is expected to be led by multi-state operators who have achieved scale, cleaned up their balance sheets and stockpiled dry powder for roll-up acquisitions. Cannabis companies raised nearly $134 million in the two weeks before Election Day, a 185% increase over the same period last year. Most of the money flowed to multistate operators. In addition, the biggest stocks by market capitalization saw a roughly 20% bump ahead of the election and now are trading at record volumes, providing plenty of stock currency for further acquisitions.

Among the headline acquisitions last year:

  • Curaleaf continued its multi-state expansion with two of its largest acquisitions – the all-stock purchases of its affiliated cannabis oil company Select and of Grassroot, another MSO player. Curaleaf is now the largest cannabis company in the world based on annualized revenues, with annualized sales of $1 billion and operations in 23 states and 96 open dispensaries. Curaleaf also raised $215 million privately last year end for further expansion.
  • Close behind, Aphria and Tilray announced in December that they will merge, creating what they say will be the largest cannabis company in the world with an equity value of roughly $3.8 billion. The combined entity will have facilities and offices in the U.S., Canada, Portugal and Germany. The deal is expected to close during the second quarter of this year.
  • Also in December, Illinois-based Verano Holdings LLC unveiled plans to go public at a $2.8 billion valuation through a reverse takeover of a Canadian shell company. That deal followed the announcement that Verano will merge with Florida-based AltMed.
  • In addition, publicly traded New York cannabis firm Columbia Care signed a definitive agreement last month to acquire Green Leaf Medical, a privately held Maryland-based cannabis manufacturer and retailer, for $45 million in cash and $195 million in stock. The acquisition is expected to close this summer. Including Green Leaf’s inventory, the Columbia Care will operate 107 facilities, including 80 dispensaries and 27 cultivation and manufacturing facilities. Columbia Care also took advantage of cannabis fever last year by raising $100 million privately.
  • Also in December, Ayr Strategies announced it would acquire Liberty Health Sciences, one of the largest cannabis companies in Florida, for $290 million in stock, as well Garden State Dispensary, a New Jersey marijuana company for $41 million in cash, $30 million in stock and $30 million in the form of a note. This follows Ayr’s $81 million acquisition of an Arizona medical marijuana operator in November. Voters approved marijuana use in Arizona and New Jersey in November.  Ayr has completed a string of acquisitions in Nevada, Massachusetts, Pennsylvania, Arizona, Ohio and, upon the closing of December’s deals, New Jersey and Florida.

Not all cannabis companies will rely on acquisitions, however. Trulieve, as an example, has focused its efforts on Florida and organic growth. It remains to be seen whether a multi-state approach fueled by acquisitions or a single-state organic growth model will prove the more lasting. Growth and profitability in the short term likely will continue to be hampered by limits on economies of scale due to federal restrictions and differing state laws.

In light of the maturing industry and the 2019 bust, the valuation model for acquisitions in the cannabis space is evolving from one based on sales, typically associated with emerging growth industries, to a more mature industry model based on profits or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Most cannabis MSOs have stabilized and generate positive EBITDA, which justifies the evolution away from a sales-driven model.

From a legal standpoint, the same limitations that have vexed the cannabis industry for years will continue to challenge deal makers until there is greater clarity on the federal front. Institutional investor reluctance, financial industry constraints, haphazard state regulation and the unavailability of federal forums such as national copyright and trademark registration will continue to be issues for acquirers and their lawyers in the space.

Acquisition agreements will continue to have to address the federal Damocles’ sword should expected relaxation of federal enforcement under the Biden administration and further legislative relief does not materialize as expected. Although the U.S. House in December passed the “Marijuana Opportunity Reinvestment and Expungement Act” (MORE) to remove cannabis from the Controlled Substances Act, the Senate did not take up the bill in 2020 and it will have to be re-introduced in 2021. Notably, the MORE Act does not affect existing federal regulation of cannabis, such as the Food, Drug and Cosmetics Act, under which the FDA has limited the use of CBD in certain products despite hemp being removed from the Controlled Substances Act in 2018.

The cannabis M&A market is moving into a more mature phase, as MSOs will be choosier in their approach rather than continuing the land-grab mentality of years past. Due to improved financial strength, 2021 should see these MSOs continuing to expand their footprints either within existing states or new ones. Although uncertainties abound, further consolidation and expansion through add-on acquisitions is likely to continue apace in 2021, providing plenty of opportunities for deal makers and their lawyers.

A Dank Opportunity: Private Equity in the Cannabis Industry & Compliance with the Securities Act

By Kayla Kuri
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Under current federal law, financial institutions are extremely limited in the services and resources that they can offer to cannabis companies. Without access to traditional financing, cannabis companies have been forced to turn to outside investments to finance their operations. The private equity approach can be a “dank” opportunity for cannabis companies; however, these companies should be cognizant of the securities laws implications that are present with this type of business structure. The focus of most cannabis companies when forming their business is compliance with the regulatory scheme of their jurisdiction as it relates to the operation of a cannabis business. While compliance with these laws is important, it is also important that these companies ensure that they are compliant with the Securities Act of 1933 (the Securities Act) before accepting investments from outside sources.

Securities Act Application

Oftentimes, smaller companies don’t realize that they are subject to the Securities Act. However, the definition of a “security” under the Securities Act is very broad1 and under S.E.C. v. W.J. Howey Co., an investment in a common enterprise, such as a partnership or limited liability company, where the investor expects to earn profits from the efforts of others is considered a “security” and thus, subject to the rigorous requirements of the Securities Act.2 In general, all companies offering securities within the United States are required to register those securities with the Securities and Exchange Commission (SEC) unless a registration exemption is available.3 A company can register its securities (i.e., its ownership interests offered to investors) with the SEC by filing a Registration Statement. These statements generally offer investors certain information about the company in order to enable investors to be able to make an informed decision about their investment. Filing a Registration Statement can be both time-consuming and costly, and most companies want to avoid filing one if they can. Luckily, the Securities Act offers certain exemptions from registration requirements to companies who meet certain standards.4 While there are numerous exemptions from securities registration, the most common exemptions used are the Regulation D5 exemptions, which provides three different exemptions based on the size of the offering and the sophistication of the investors, and the Rule 1476 Intrastate exemption.

Regulation D Exemptions

Rule 504-Limited Offerings

Rule 504, often called the “Limited Offering” exemption, provides an exemption from securities registration for companies who limit the offer and sale of their securities to no more than $5,000,000 in a twelve-month period.7 Unlike the other Regulation D exemptions, which are discussed in further detail below, the Limited Offering exemption does not have any limitations on the level of sophistication or number of investors.8 This means that companies who rely on this exemption do not have to verify the net worth or income of their investors or limit the number of investors in the company. Like all Regulation D exemptions, companies relying on the Limited Offering exemption are required to file a “Form D” with the SEC within 15 days of the first securities sale.9 A Form D is a relatively simple form which provides basic information about a company to the SEC, including the registration exemption that is being relied upon. A copy of Form D can be found here.

Rule 506(b)

The “Private Offering” exemption can be found at Rule 506(b) of Regulation D.10 This exemption is commonly used for larger investment offerings with varying levels of investor sophistication. The Private Offering exemption can be used for investment offerings of any size so long as the company: (1) does not use general solicitation or advertising, such as newspaper articles or seminars, to attract investors; and (2) limits the number of “non-accredited investors” to no more than 35.11 “Accredited investors” are those investors whom the Securities Act deems sophisticated enough to properly weigh the risk of their investment in the company. In order to qualify as an accredited investor, the investor must:

  1. Have an individual income of more than $200,000 in the past two years
  2. Have a joint income with their spouse of more than $300,000 in the past two years
  3. Have an individual net worth, or joint net worth with their spouse, in excess of $1,000,000 or:
  4. Be a director, executive officer or manager of the Company.12

If the investor is a corporation, partnership, limited liability company or other non-trust entity, then to qualify as an accredited investor, it must either have assets in excess of $5,000,000 or each of its equity owners must meet one of the requirements for individuals listed above.13 If the investor is a trust, then the trust must: (1) have total assets in excess of $5,000,000 and the investment decision must be made by a “sophisticated person” (i.e., the person who is making the investment decision has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of an investment in the company); (2) have a trustee making the investment decision that is a bank or other financial institution; or (3) be revocable at any time and the grantor(s) of the trust must meet one of the requirements for individuals listed above.14

The Private Offering exemption allows a company to have an unlimited number of accredited investors, but only up to 35 non-accredited investors. However, companies should be very cautious of allowing non-accredited investors to invest in the company. The Securities Act requires that companies make extensive disclosures to non-accredited investors which are essentially the same requirements as the company would have to provide in a registered security offering. These requirements include providing investors with financial statements, operations plan, detailed descriptions of the company’s business, description of all property owned, discussion and analysis of the company’s financial condition and the results of operations, biographies of and descriptions of each officer and director, as well as other descriptions regarding the details of the company.15 Failure to provide the necessary information to non-accredited investors can disqualify companies from the benefits offered by the Private Offering Exemption. Companies should be very cautious when relying on the Private Offering exemption. If a company does choose to utilize the Private Offering exemption, they must file a Form D with the SEC within 15 days of the first securities sale.

Rule 506(c)

Rule 506(c), the “General Solicitation” exemption, is similar to the Private Offering Exemption. Unlike the Private Offering exemption, companies relying on the General Solicitation exemption are permitted to use general solicitation and advertising to advertise their securities to potential investors.16 However, investors relying on the General Solicitation exemption must only sell their securities to accredited investors.17 Under Rule 506(c), the company selling the securities must take steps to verify the accredited-investor status of their investors.18 These steps can include reviewing past tax returns, reviewing bank statements, or obtaining confirmation from the investor’s attorney or accountant that such person is an accredited investor.19 Like the other Regulation D exemptions, companies relying on the General Solicitation exemption should file a Form D with the SEC.Private equity can be a dank opportunity for cannabis companies, but it is critical that these companies ensure that they are in compliance with all applicable securities laws.

Intrastate Exemption

Rule 147, known as the “Intrastate” exemption, provides an exemption from securities registration for companies who limit the offer and sale of their securities to investors who are residents of, if they are an individual, or have its principal place of business in, if they are an entity, the state where the company is organized and has its principal place of business.20 The Intrastate exemption permits general solicitation to investors who are in-state residents, and there are no limitations on the size of the offering or the number of investors, whether accredited or unaccredited. In addition, companies relying on this exemption are not required to file a Form D with the SEC. The Intrastate exemption can be very desirable to companies who wish to obtain a small number of key investors within their communities.

State Requirements

In addition to complying with the Securities Act, companies are also required to comply with the securities laws of each state where their securities are sold. Each state has its own securities laws which may place additional requirements on companies in addition to the Securities Act. Most states (including California, Colorado, Oregon, and Oklahoma) require that a copy of the Form D filed with the SEC be filed with the state securities commission if securities are sold within that state. Before offering securities for sale in any state, companies should thoroughly review the applicable state securities laws to ensure that they are in compliance with all state requirements in addition to the requirements under the Securities Act.

Additional Considerations for Cannabis Companies

Despite the fact that the purchase and sale of cannabis is illegal under federal law, cannabis companies are still subject to the Securities Act in the same manner as every other company. However, the SEC has issued a warning to investors to be wary of making investments in cannabis companies due to the high fraud and market manipulation risks.21 The SEC has a history of issuing trading suspensions against cannabis companies who allegedly provided false information to their investors.22 Cannabis companies who wish to rely on any of the registration exemptions under the Securities Act should ensure that they fully disclose all details of the company and the risks involved in investing in it to all of their potential investors. While cannabis companies are permitted to rely on the registration exemptions under the Securities Act, the SEC appears to place additional scrutiny on cannabis companies who offer securities to outside investors. It is possible to fully comply with the onerous requirements of the Securities Act, but cannabis companies should engage legal counsel to assist with their securities offerings. Failure to comply with the Securities Act could result in sanctions and monetary penalties from the SEC, as well as potentially jeopardize a cannabis company’s license to sell cannabis. It is extremely important that companies seek advice from legal counsel who has experience in these types of offerings and the requirements of the Securities Act and applicable state securities laws. Private equity can be a dank opportunity for cannabis companies, but it is critical that these companies ensure that they are in compliance with all applicable securities laws.


References

  1. See 15 U.S.C § 77b(a)(1)
  2. 328 U.S. 293 (1946).
  3. 15 U.S.C § 77f.
  4. See 15 U.S.C § 77d.
  5. 17 CFR § 230.500.
  6. 17 CFR § 230.147.
  7. 17 CFR § 230.504.
  8. Id.
  9. Id.
  10. 17 CFR § 230.506(b).
  11. Id.
  12. 17 CFR § 230.501.
  13. Id.
  14. Id.
  15. 17 CFR § 230.502; 17 CFR § 239.90; 17 CFR § 210.8; 17 CFR § 239.10.
  16. 17 CFR § 230.506(c).
  17. Id.
  18. Id.
  19. Id.
  20. 17 CFR § 230.147.
  21. Investor Alert: Marijuana Investments and Fraud. (2018, September 5).
  22. Investor Alert: Marijuana-Related Investments. (2014, May 16).

2020 Financial Trends for the Cannabis Industry

By Melissa Diaz
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The past year has been another strong year in cannabis. Investors continued to pour money into the burgeoning industry — surpassing 2018 investment totals in just 40 weeks — and new markets opened up for recreational and medical cannabis. And following the passage of the 2018 Farm Bill, CBD has proliferated and become one of the hottest health supplements in the country.

But as the year winds down, the industry appears to be poised for a more challenging shift in the new year, as once-heady expectations for some big companies don’t pan out and some states clamp down, rather than loosen up, certain regulatory hurdles.

Here are some financial trends to keep an eye on in cannabis over the next year:

Finding New Capital Investment Will Be Tougher

After an initial investment boom in recent years, cannabis investors are realizing not everything colored green turns to gold. With public cannabis companies not performing as well as hoped and restrictive tax laws still plaguing the industry, investors are growing more cautious when it comes to cannabis. Add in other macroeconomic trends that are pointing to a global economic slowdown, and 2020 is shaping up to be a tough year to find cannabis capital.

Image: Flickr

That’s not to say funding will completely dry up, but operators and business owners must be aware that investment deals that perhaps closed in a matter of days in previous years, likely will take weeks or months while investors dig deeper into books and perform higher levels of due diligence before inking a deal. This means cannabis businesses must carefully plan and watch their cashflow and pursue fresh capital or investment earlier rather than later.

Expect More M&A and Consolidation

With the green rush reaching a crest of sorts, reality is setting in for some smaller cannabis operators. Expect to see more consolidation with smaller dispensaries and cultivators being bought up and absorbed by the big kids. More limited capital and investment options coupled with continued regulatory and legal uncertainties mean unsustainable operating costs for independent and smaller operators, which means the only way to survive may be to sell to a larger player.

New Markets & Regulations

The new year brings new states opening up to recreational or medical cannabis sales, as well as newer or altered regulations in existing markets. Cannabis firms must keep an eye on these new markets and regulations to best determine whether they plan to expand or not.

How stringent or lenient regulations are written and executed will determine the size and viability of the market. One state may severely limit the number of licenses it issues, while others may not put any limit. For example, Oklahoma issues unlimited licenses to grow hemp at $1,500 a piece. While that sounds promising for smaller hemp producers, it also could potentially lead to an oversaturation in the market. On the flip side, a more restrictive (and costly) licensure structure could lead to a far more limited market where only the industry’s largest players will be able to compete.

Image: Cafecredit, Flickr

Cannabis businesses also should keep an eye out for new regulatory hurdles in existing cannabis markets. For instance, California is raising its excise tax on cannabis beginning Jan. 1. That will result in higher costs for both consumers and cannabis companies. High state and local taxes have been a challenge industrywide because they make legal operators less competitive with the illicit market. Also, a proposed rule in Missouri could ban medical cannabis operators from paying taxes in cash. Such a rule would prove problematic for an industry that has had to rely on cash because of federal banking regulations. 

Credit Card Payments

While cannabis businesses may face several new and recurring hurdles in 2020 on the financial front, at least one looming change should make business easier: credit card payment processing. Because of cannabis’ continued banking woes, dispensaries and other plant-touching operations have not been able to accept credit cards. Though federal banking limitations remain in place, in 2020 we will see payment processors introduce new, creative and less expensive ways to navigate current banking limitations that will allow cannabis sellers to take credit cards. Opening up payments in this way will not only make transactions and record keeping easier for customers and businesses alike, it also will attract consumers who don’t use cash.

While some of these trends may prove challenging, in many ways they are signs that the cannabis industry is shifting and maturing as we enter a new decade. Many hurdles remain, but the size and momentum of the industry will only continue to grow in 2020 and beyond.

Blockchain Controversies Continue To Rock The Cannabis Industry

By Marguerite Arnold
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Disclaimer: Marguerite Arnold is the founder of MedPayRx, a blockchained ecosystem that does not use utility tokens, and that is currently going to pilot in Europe designed to eliminate such risks.


As reported here in Cannabis Industry Journal last year in a three part series, there are considerable dangers of utilizing blockchain in the cannabis industry (as well as other industry sectors) that directly affect all commercial operators as well as consumers of both the recreational and medical kind. These remain largely unsolved.

These include regulatory and compliance issues in every direction, starting with banking and securities law, but also include privacy and consumer protections. They also fly in the face of regulations imposed by governments to control inflation, set prices for medications and food, and prevent monopolies.

Beyond that, they also pose considerable if so far unexamined liabilities for businesses operating in this space (including uncontrollable volatility in basic business operations) that very much impact the basic cost of doing business.As of the beginning of this year, however, the situation is back in the news. 

The Skinny On Paragon
As of November last year, the company was sanctioned by the SEC in a precedent setting case on the issue of whether “utility tokens” are securities or not. In fact, the SEC found that Paragon illegally marketed and distributed digital securities under the false pretension that they were not securities. Paragon, in turn, reached a settlement with the SEC that it would return any funds received by investors prior to October 15, 2017 and pay a fine to the SEC.

As of the beginning of this year, however, the situation is back in the news. Because of the settlement agreement, it appears that a pump and dump group operating through the exchange YoBit managed to raise the token briefly from about $.10 a token to $10 in an effort to raise the cost of compensation from Paragon. This absurd rally was completely unsustainable, and as a result, fell back to $0.3 per token (albeit tripled the price of the token). But the fact that it happened at all is illustrative of the extreme risk now faced by the industry itself from this kind of tech and financial model.

Why? It means that all users (token holders) of such an ecosystem and for any purpose, would be directly exposed to such risks in the future. And on literally an hour-by-hour basis.

Utility tokens in other words, as defined by all such models (and Paragon is far from the only one), are used not only for investment in such businesses, but then bought downstream, via exchanges, by people who wish to transact in the network itself. And that is the real danger to businesses themselves by adopting such models.

Problem 1 – Utility Tokens Are Securities

The biggest issue at the heart of this conversation is this: Tokens are recognized now as securities, and further still operating in a world where pump and dump on the exchanges is a major liability for all who buy the tokens for any purpose. This means for example, that anyone who must buy a system cybercoin to transact within a blockchained ecosystem (from consumer to business manager overseeing international distribution of their product from the commercial end) would face unprecedented volatility that does not exist by using regulated currencies. Good old dollars and euros for example do not pose this kind of existential risk to businesses themselves.

In the Paragon case directly, for example, owning Paragon crypto means that monthly rent at the incubator would fluctuate in cost based on the unregulated cost of the coin, not a prenegotiated rental agreement in regular currency for space (which is far less volatile). In the current environment, such space just tripled in price.

Beyond that, no consumer in California, for example, would want to have to face the added cost of buying a hyped token (at artificially raised prices) before they can access the newest, coolest strain of bud.

Such systems in other words, are NOT just a fancy form of a digital payment solution (like Paypal). What they do dramatically increases the risk of price volatility in all business operations (also called “cost of goods sold” or COG), andto the end user while also directly exposing all to such risk at every point of production, processing and sales.

Why?Latency issues are also a major issue.

Because the cost of conducting normal, basic business operations would be directly exposed to speculating investors. Even local businesses, in other words, would be completely vulnerable to not just the fluctuations domestically or even internationally caused by doing business in multiple jurisdictions and traditional currency risk, but have direct and unprecedented exposure to a much less regulated and far more volatile price environment globally. And further one that affects literally the entire manufacturing and distribution process.

Problem 2 – Network Congestion

Latency issues are also a major issue. This is a bit more technical and complicated, but is one of the bigger reasons why most blockchain technology and solutions are still incapable of dealing with commercial industry requirements. Much less keep regulated industries in any space, in compliance.

Here is one way to think of the problem. If you have many users on a blockchain network all at once, speed of transaction goes way down and associated costs go way up.

The tokenized asset in other words, has to compete not only with people buying the token as an investment, but those using them to buy goods and services on the commercial side AND the industry processing taking place behind the scenes to fulfil and track product. This has been easy to see with Bitcoin in particular, but is not limited to the same.

Further, prioritization on a network itself (and the costs involved to overcome them, also paid in tokens) then unfairly creates a monopoly environment because of the added costs involved to speed up otherwise normally processed and critical operations. The biggest boys on the block(chain) win. Always. That is antithetical to anti-trust law.

Problem 4 – Undermining Basic Government Regulations On Cost Of Purchase

Here is the biggest conundrum, particularly facing the international cannabis industry now in the process of exporting across international borders. Governments (particularly in Europe) routinely set prices on medicine (in particular), for large contractual purchases and to insure the continued survival of public healthcare (which in Europe and the UK covers most people). See the German cultivation bid for cannabis as a prime example. The government is forcing the industry to submit prices via competitive bid that are expected to come in somewhere between 1-1.5 euro per gram. This in turn will affect not only domestically grown but imported cannabis – and from all points on the globe as the industry opens up.

That process is impossible in an environment where the cost of production itself would be (in a price volatile blockchained delivery system) inherently unpredictable and unstable because the price of production and distribution is itself a speculated upon commodity that can vary, literally, at the speed of a pump and dumped token, sold on any unregulated exchange, anywhere in the world. And as a result, is also illegal.

Aphria Fights Shortseller Allegations Of Insider Double Dealing

By Marguerite Arnold
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Two reports published by short selling stock firm Quintessential Capital Management and forensic investor research firm Hindenburg Research on December 3, charges that Canadian LP Aphria, has bought overinflated assets in Latin America and in Florida from shell companies owned by company insiders. Added to the lingering controversy is the purchase of the German Nuuvera this spring (a company also partly owned by Aphria brass), and the reports went over like a bombshell. Globally.

However, the story has already spread far beyond one company. And the response in the market has rocked the industry for most of December.

Aphria’s shares tanked, and dragged everyone down with them. Several class action law firms in the United States began promptly looking for aggrieved shareholders.

The response by the firm? A promise of an immediate line-by-line rebuttal, due out in the second week of December. So far, however, despite news of an additional Aphria purchase in Paraguay, the rebuttal report has not been issued.

Why Is This So Damaging? Or Is It?

Aphria’s stocks promptly took a dive that halved their value although they began to recover after Aphria management appointed an independent third party firm to review the claims.

Worse, however, the entire industry saw a hit too. This report affected investor confidence across the industry. And although the hit appears to be temporary, the unfolding scenario is a perfect example of why volatility in the market is scaring away not only more conservative female retail investors but larger institutional ones that the industry is now courting assiduously as medical cannabis begins to be integrated into health systems particularly in Europe.

Why?

Bottom line? As the big cannabis companies are listing on the larger, foreign exchanges, including the NYSE and Deutsche Börse, the scrutiny is getting more direct and granular.Despite the stratospheric market caps of all the major Canadian LPs in particular, not to mention enormous expenditures for the last several years (on property and other acquisitions), the revenue picture, as other stock analysts and publications such as the normally neutral Motley Fool recently pointed out, at least so far does not justify the same. Bulk sales to a hospital, establishing a cultivation or processing facility or even getting import licenses may set one up to do business however, but it is not an automatic route to ongoing and expanding sales. And that is the key to high valuations that are rock solid and beyond the scope of such allegations.

For the moment, that pressure, particularly in global medical markets, is falling first on patients if not doctors. Not the industry.

That said, this has been a major building year. Recreational cannabis has just become legal in Canada. And in Europe, reform is still in the process of happening.

It is also a charge if not frustration that has been growing, however, against all the public cannabis companies as valuations shoot into the stratosphere. Forensic and investigative firms, particularly in Europe and the United States have been focusing on the industry for close to a year now. As a result even when firms successfully rebut charges of fraud, they are looking at different valuations from analysts at least in the short term.

Bottom line? As the big cannabis companies are listing on the larger, foreign exchanges, including the NYSE and Deutsche Börse, the scrutiny is getting more direct and granular.

Are “Short Seller” Reports Unbiased?

For all of the focus on short seller reports in this industry, however, no matter the accuracy of some of their claims, here is the next issue:

Short sellers make money by betting against not only individual firms but the industry itself. They benefit financially in other words, from volatility in the market and arbitraging even small changes in price. Even if their reports cause the same.

Such reports as a result are also not “unbiased” as industry coverage in the press is supposed to be, no matter how much more time sometimes goes into the reporting and preparation of the same.

And no matter that this industry is now going into its fifth year, there is still lingering scepticism that, in the case of Aphria, has so far not only fallen on the individual firm in question, but then rebounds across the industry, unfairly hurting all firms in this space.

Marguerite Arnold

A Busy 4th Quarter Heralds An Amazing Cannabis Year Globally

By Marguerite Arnold
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Marguerite Arnold

In retrospect, when the cannabis history books are written, 2018 may come to represent as much of a watershed year as 2014. Much has happened this year, culminating in a situation, much like at the end of the first year of modernization, where great victories have been achieved. But a long road to true acceptance and even basic and much broader medical use still beckons. Even if the new center left ruling coalition party in Luxembourg has just announced that recreational cannabis reform is on its agenda for the next five years.

This is a quick and by no means a full review of both fourth quarter activity globally, and how that ties into gains for the year.

Canada Legalizes Rec Sales

Beyond all the other banner headlines, October 17 will go down in history as the day that Canada switched the game.

Will 1017 replace 420? Not likely. But it is significant nonetheless.

What does this mean for the rest of the industry (besides international border checks and lifetime bans for Canadian executives and presumably others traveling into the U.S. to cannabis industry conferences at present)? For starters, a well-capitalized, public industry which is building infrastructure domestically and overseas like it is going out of style.

This is important for several reasons, starting with the fact that the big Canadian LPs are clearly not counting on supplying Europe from Canada for much longer. Why? The big European grows that were set up last year are starting to come online.

So Does California…

And other significant U.S. states (see Massachusetts this month and Michigan) are following suit. However the big issue, as clearly seen at least from Canada and Europe, is there is no federal reform in sight. That opens up a raft of big complications that so far, most U.S. firms have not been able to broach. That said, this situation is starting to change this fall, with two U.S. firms entering both Greece and Denmark, but in general, a big issue. Canadian firms are still trying to figure out how to both utilize the public markets in the U.S. without getting caught in detention when crossing the border.the U.S. is continuing to be a popular place to go public for Canadian firms

Regardless, the U.S. is continuing to be a popular place to go public for Canadian firms, who are also looking for access to global capital markets and institutional capital. Right now, Frankfurt is off limits for many of them. See the Deutsche Börse. That said, with the rules already changing in Luxembourg, one firm has already set its sights for going public in Frankfurt next spring.

The German Situation

Like it or not, the situation in Germany is key to the entire EU and increasingly a global enchilada, and no matter where companies are basing their cultivation sites at this point, there are two big gems in the European cannabis crown. Deutschland is the first one because of the size of the economy, the intact nature of public healthcare and the fact that the German government decided to mandate that sick people could get medical cannabis reimbursed by their public health insurer.

german flag
Photo: Ian McWilliams, Flickr

Ironies abound, however. In the last quarter, it is clear from the actions of the Deutsche Börse that Frankfurt is not a popular place to go public (Aurora went public on the NYSE instead in late October).

The cultivation bid was supposed to come due, but it is now likely that even the December deadline might get pushed back again, interminably at least until April when the most recent lawsuit against the entire process is due to be argued.

In the meantime, there is a lot of activity in the German market even if it does not make the news. Distribution licenses are being granted all over the country (skip Berlin as there are already too many pending). And established distributors themselves, particularly specialty distributors, are increasingly finding themselves the target of foreign buyout inquiries.

There are also increasing rumours that the German government may change its import rules to allow firms outside of Canada and Holland to import into the country.

The German market, in other words, continues to cook, but most of it is under the surface a year and a half after legalization, to figure things out.

The UK

Next to October 17, the other date of note this fall of course was November 1. The Limeys may not have figured out Brexit (yet). But cannabis for medical use somehow made it through the national political fray this summer. Hospitalized children are compelling.

UKflagNow the question is how do other patients obtain the same? The NHS is in dire straits. Patients must still find a way to import the drug (and pay for it). And with newly imposed ex-im complications coming Britain’s way soon, there is a big question as to where and how exactly, patients are supposed to import (and from where). All looming and unanswered questions at the moment.

But hey, British doctors can now write prescriptions for cannabis.

Greece and Malta

Greece and Malta are both making waves across Europe right now. Why?

The licensing process that has continued into the fall is clearly opening up inexpensive cultivation in interesting places. Greece is growing. Malta, an island nation that is strategically placed to rival Greece for Mediterranean exports across Europe is still formalizing the licensing process, but don’t expect that to last for long.

Look for some smart so and so to figure out how to beat Brexit and import from Malta through Ireland. It’s coming. And odds are, it’s going to be Malta, if not the Isle of Mann that is going to clinch this intriguing if not historical cultivation and trade route.

Poland

Just as October came to a close, the Polish government announced the beginning of medical imports. Aurora, which went public the same week in New York, also announced its first shipment to the country – to a hospital complex.

Let the ex-im and distribution games begin!

It is widely expected that the Polish market will follow in German footsteps. Including putting its cannabis cultivation bid online whenever the Polish government decides to cultivate medical supplies domestically. The country just finalized its online tender bid system in general.

Does anyone know the expression for “pending cannabis bid lawsuit in Warsaw” in Polish?

Notable Mentions

While it gets little press outside the country, the Danish four year experiment is reaching the end of its first year. While this market was first pioneered by Canopy/Spectrum, it was rapidly followed by both Canadian LPs and others entering the market. Latest entrant this quarter? A tantalizingly American-British conglomerate called Indiva Ltd. as of November 21.

Italy is also starting to establish a presence in interesting ways as multiple firms begin to establish cultivation there.

There are also increasing rumours and reports that Israel might finally be able to start exporting next year. That will also disrupt the current ecosystem.

And most of all, beyond a country-by-country advance, the World Health Organization meeting in early November and in the early part of December is likely to keep the pressure on at a global level for rescheduling and descheduling the cannabis plant.

This in turn, is likely to set the stage as well as the timeline for rec use in Luxembourg. Look for developments soon.

A busy time indeed. Not to mention a quarter to end a very intriguing year, and certainly destined to sow returns for years to come, globally.