Economics
From Flow Kana to MedMen, Big Cannabis Gets a Big Cash Influx
Some of the best-known cannabis businesses — Harborside, Flow Kana, Apothecarium and MedMen — have struck multimillion-dollar deals since the beginning of February. But what does this sudden flood of cash mean for the industry as a whole?
As 2019 surges forward, American cannabis executives are already seeing green in a big way, thanks to a new flood of investment in the industry from sources both stateside and international.
Show Me the Money!
Most recently, craft-oriented production and distribution firm Flow Kana announced its closure of a $125 million round of funding late Wednesday night. The firm set a new record for largest private funding round for an American cannabis company, per MJBizDaily, unseating Acreage Holdings’s July 2018 record. Flow Kana CEO told MJBizDaily the new funding “will be used to ‘double down on the supply chain strategy and allow Flow Kana to expand into other categories.’” This likely means more investment in craft cannabis, particularly in NorCal’s Mendocino County.
Also on Wednesday, the dispensary magnates at MedMen announced their most recent acquisition of “vertically integrated operations” Kannaboost Technology Inc and CSI Solutions LLC in Arizona, per BusinessWire. Between the latest news and the company’s pending acquisition of PharmaCann, LLC, MedMen is on track to control 30 operational stores, with licenses for up to 78 facilities total in 12 different states, including California, New York, Florida, Nevada, Michigan and Virginia.
On the heels of this announcement, however, came the news that MedMen currently faces three different lawsuits — so maybe don’t rush out and invest just yet.
And on Feb. 11, Bay Area marijuana stalwart Harborside announced a new deal with Toronto-based cannabis company Lineage Grow Co. that would list Harborside on the Canadian Securities Exchange — a popular move, according to the San Francisco Chronicle, due to the fact that cannabis companies are currently prohibited from listing on the U.S. stock exchange. Though Lineage technically purchased Harborside, the latter company’s owners will retain control of the majority of the shared company’s stock, essentially rendering Harborside the dominant entity.
Per the Chronicle’s report, around 50 American cannabis companies listed themselves on the Canadian Securities Exchange last year, following the advent of legalization there.
On the same day, Apothecarium CEO Ryan Hudson announced the sale of his company, and the four dispensaries it currently operates, to another Canadian company: TerrAscend, also based in Toronto. The deal was inked for $118 million in cash.
“I never conceived of such an investment and exit when we started the company. This industry has changed by leaps and bounds,” Hudson told the Chronicle. But if this spate of investments is any indication, that mindset in new cannabis entrepreneurs is likely on the road to extinction.
Okay, Great, But What Does It Mean?
For customers, one can only assume that more capital pumped into the cannabis industry will spell out more product availability, which could be good news for those living in states with legal adult-use but few ways to actually take advantage of it. Though quantity doesn’t necessarily translate to quality, at the very least these companies have a vested interest in lifting the stigma on consuming pot. So, if you’re a head looking to catch a break from your skeptical loved ones, this news could be just what you need to get your rich-but-judgy Uncle John off your back and onboard the legalization train.
But on a less optimistic note, it remains to be seen what growth for big cannabis corporations, even ones with grassroot ties like Harborside, will mean for smaller cannabis businesses that have struggled in the wake of legalization.
On the one hand, broader bud availability could be good industry-wide in a sort of trickle-down sense, especially if more established companies are able to convert non-smokers or refine the tastes of a casual user, driving them into the arms of smaller, more specialized canna-businesses. But unfortunately, big business growing bigger could also very well spell doom for smaller producers already working hard to eke out a living against the glossier, better-funded competition.
TELL US, how do you feel about the rise of Big Cannabis?
