New York-based cannabis company Acreage Holdings began trading on the Canadian Securities Exchange using the symbol ACRG.U and pricing the shares at $25. The “U” in the symbol designates that the company is trading in Canada, but in U.S. currency. The company has raised $314 million prior to going public and gained a great deal of attention after naming high profile politicians to the board of directors.
Prior to trading Acreage had a $2.5 billion valuation and it is expected to pop to $2.8 billion following the opening of trading. CEO Kevin Murphy will own 20% of the company, but he will retain 80% of the voting rights.
Acreage Holdings has one of the largest footprints of the quickly expanding universe of multi-state operators. It is in 17 states and most recently during the company’s road show picked up the approval for a license in Oklahoma.
Investors that want to buy shares in Acreage will mostly be making that decision with little information on hard numbers. By doing a reverse takeover of TK, Acreage wasn’t required to disclose financial information. President George Allen confirmed that the company would not be releasing projected revenue figures. “We didn’t want to put out 2020 numbers,” he said. “We want people to invest with us based on our footprint and not projected revenues.” He felt that some companies suggest they will make huge revenues and then in order to make those numbers go on an acquisition bender to try to keep investors happy.
Acreage isn’t buying other companies in order to make ambitious projected sales figures, said Allen. “We’ve always been acquisitive, so this isn’t new,” he said. By raising more capital, Allen said the company would accelerate its pace of acquisitions.
Allen said that the difference between Acreage and other multi-state operators is the scale of the operation. “It’s the team and the assets we have,” he said, “Execution will be the difference. Plus, investors like larger players.”
Acreage wouldn’t comment on a recent lawsuit in which it was named as a party. The lawsuit claimed that Acreage acquired a property and this particular investor (EPMMNY) wasn’t included in the sale. A review of the legal document shows that EPMMNY’s equity stake was never finalized and so it wasn’t included in the final application for New York Canna. Acreage ultimately ended up owning all of NY Canna, also known as Terradiol NY. The plaintiff is seeking no less than $100 million to compensate it for sustained damages as well as punitive damages of at least $300 million.
Considering that this license was awarded in May of 2017, but the party didn’t file a lawsuit until a week before Acreage looked to be going public makes it seem as if the plaintiff decided to wait until it looked like Acreage could have a deep pocket following its stock going public.
Allen believes there are several states that could be coming on strong. He thinks that Colorado could potentially change its laws to allow outside investors into the industry. This would unlock many companies that had been hoping to sell their operations.
He is also keenly interested in Michigan. The state recently legalized adult use cannabis. “States that began with a caregiver model that then add adult use, tend to be strong markets,” said Allen.
Acreage’s home state of New York has one of the most restrictive medical cannabis markets in the country. However, the midterm elections flipped the state to a democratic rule and there has been a lot of speculation that New York will legalize adult use. “We’ll watch the budget cycle in March and April and if the Governor is serious, we see that reflected in the budget.”
Allen actually thinks Connecticut will legalize adult use sooner. “The governor is open to cannabis and the state is having major financial difficulties,” he said. “They could use the extra revenue.”