When California legalized at the beginning of 2018, there were few options for investors in public companies to participate. Terra Tech was the only publicly-traded company that actually held a license and that was generating revenue at that time, while Origin House (then CannaRoyalty) had begun to assemble some assets and had just announced a strategic change to focus on the state. Today, though, the choices have expanded dramatically, with many of the largest multi-state operators (MSOs) targeting the state for expansion. Just this past week, Pasadena awarded six retail cannabis dispensary licenses, and MSOs snagged three of them, with Green Thumb Industries, Harvest Health and Recreation and MedMen among the winners. Given the increased focus on the state as it moves beyond the early days of legalized cannabis and a more highly regulated medical cannabis market, it’s a great time to review some of the publicly-traded companies that are active in California.
Acreage Holdings entered the California market through acquisitions. It has a pending deal to acquire Oakland dispensary Kanna, for $11.5 million in stock. It also purchased Form Factory, a manufacturer, co-packer and distributor based in Oregon that is expanding to California.
Cresco Labs owns 80% of a cultivation operation in California that it reports can produce over 182,000 pounds per year, but what will make it a leading player in the state is its pending acquisition of Origin House, which I discuss below. Cresco announced the deal in April, and it will be acquiring each share of Origin House by issuing .8428 shares of Cresco Labs in exchange. The closing price of Cresco Labs on the Canadian Securities Exchange on June 7th was C$13.55, which would imply a price of C$11.42 for Origin House, which closed at C$10.26, a discount of 10.1%.
Curaleaf Holdings has operations in California, but its pending acquisition of Cura Partners, will dramatically increase the MSO’s exposure to the state. The company reports that Cura Partners has 25% share of its cannabis oil market. In December, it received a manufacturing, distribution, and mobile dispensing license from the City of Davis and is commencing operations this month. In March, it acquired Eureka Investment Partners, which has a cultivation facility in Monterey County as well as three dispensaries.
Published: June 09, 2019