This story was republished with permission from Crain’s Chicago and written by John Pletz.
The value of a cannabis dispensary just isn’t what it used to be.
Six months ago, Planet 13 (OTC: PLNHF), a Las Vegas-based marijuana company, announced it would pull the trigger on its option to buy out its social-equity partner in an Illinois cannabis dispensary in a $2.9 million transaction. By the time the deal closed yesterday, the value had dropped by $1 million because of the steep downdraft in the stocks of cannabis companies.
Planet 13 shares are now trading at just 88 cents, compared with $1.98 on Aug. 4, when it inked the deal with entrepreneur Frank Cowan to buy out his ownership in their retail license. Cowan received $866,250 in cash, along with 1 million shares, for his 51% stake in the license.
Marijuana stocks have fallen precipitously in recent months as interest rates rose, cannabis prices fell and prospects faded for congressional action that would loosen restrictions nationally on the cannabis industry.
Deals are getting renegotiated—or scrapped. Last month, Miami-based Ayr Wellness, a publicly traded company, called off its $55 million purchase of two Chicago dispensaries operated by Dispensary 33.
The declines in stock prices and canceled deals will impact the value of 192 new retail licenses that have been issued in Illinois. Under state rules, holders haven’t been able to sell their licenses until their stores are open. At least one owner has sued to challenge those rules in a case that’s still working its way through Cook County Circuit Court.
Cowan, meanwhile, says he plans to stay with Planet 13, which is building out a dispensary in Waukegan that’s expected to open this summer. And he may well come out OK financially, given some time: He can’t sell his 1 million shares right away, due to a six-month lockup period, and the shares vest over 12 months.