MSO Archives - Green Market Report

Debra BorchardtMay 28, 2019


Cannabis Strategies Acquisition Corp. which will now be known as AYR Strategies Inc. began trading today on the NEO Exchange in Canada under the symbols NEO: AYR.AAYR.RT and AYR.WT. AYR is the first recreational cannabis-focused company with an enterprise value over a billion dollars to list on NEO.

As part of its qualifying transaction to be listed on the NEO Exchange, CSA acquired five distinct cannabis businesses operating in Nevada and Massachusetts consisting of three cannabis cultivation and production facilities and eight dispensaries.

“With today’s five acquisitions, AYR begins its next phase as a vertically integrated Multi-State Operator (M.S.O) and a leader in the U.S. cannabis market,” stated Jonathan Sandelman, CEO, AYR. “AYR will aggressively seek additional growth both organically and through accretive external opportunities.” The company has tapped Wall Street for its C-suite. Sandelman is a former President at Bank of America and Jennifer Drake, the company’s COO is a former Managing Director of Goldman Sachs.

CSA completed its initial public offering as a Special Purpose Acquisition Corporation (SPAC) in December 2017 and said it was the first SPAC to list on NEO. The NEO Exchange is home to over 70 corporate and ETF listings, and consistently facilitates over 10% of all Canadian trading volume.

“We are very happy today to see the full circle completed by CSA, the first special purpose acquisition corporation focused on the cannabis sector and the first special purpose corporation to list on NEO,” said Jos Schmitt, President and CEO, NEO.“Congratulations to AYR on its debut following CSA’s qualifying transaction as a billion-dollar company. As a stock exchange for senior listed companies, we are excited and motivated to be capital-raising partners on the front lines of an exciting industry. We look forward to watching the growth of AYR within the North American cannabis market.”

Investors can trade securities of AYR through their usual investment channels, including discount brokerage platforms and full-service dealers.

StaffMarch 26, 2019


Under-the-radar U.S. MSOs are the best cannabis stocks to invest in

By WAYNE DUGGAN, InvestorPlace Contributor

Cannabis stocks have gotten a lot of attention on Wall Street in the past year after a handful of popular Canadian growers started hitting the U.S. markets. U.S.-listed names like Canopy Growth Corp (NYSE: CGC), Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) get most of the publicity.

However, OTC-traded stocks Curaleaf Holdings(OTC: CURL), Medmen Enterprises (OTC: MMNFF) and Green Thumb Industries (OTC: GTBIF) could be the best cannabis stocks to invest in.

Path To Legalization

In a new report, Roth Capital Partners analyst Scott Fortune says the cannabis industry has major long-term potential for investors. However, given the massive gains in the most popular stocks in the past year, near-term upside may be limited. Instead, Fortune says the best risk-reward skew in the cannabis space is with U.S. multi-state operators.

“In our view, the most promising public companies — i.e., those whose stocks possess the most attractive risk/reward profiles — are the U.S.-based MSOs — which are assembling dominant positions in the most lucrative U.S. states,” Fortune says.

Today, these operators are technically violating federal law, which classifies marijuana as a Schedule 1 drug. That classification also keeps these cannabis stocks from listing on the NYSE or Nasdaq exchange. However, Fortune says the STATES Act could be a game-changer for MSOs. The STATES Act wouldn’t legalize cannabis on a national level. However, it would exempt companies and individuals from federal enforcement of marijuana laws when inside states with conflicting laws.

This legislation would continue the U.S. along the path toward federal legalization and would embolden MSOs to continue to expand their operations. Fortune says once the legalization damn breaks, the financing flood waters will rush in.

“Federal protection, albeit illegal, has allowed creative risk-taking entrepreneurs (MSOs) to quickly gather valuable assets ahead of an eventual large influx of capital investments,” he says.

Huge Opportunity for Cannabis Stocks

Roth estimates the $11 billion U.S. cannabis market will more than double in size — to $23.4 billion — by 2022. Ultimately, federal legalization will expand that market to at least $59 billion in size, Fortune says.

In the long term, Fortune says the social stigma of cannabis will wear off. Eventually, the drug could have a market penetration similar to alcohol today. Roughly half the adult population in the U.S. drinks alcohol. At that penetration rate, the U.S. cannabis market could eventually approach $200 billion. As of early 2019, the top 10 MSOs had a combined market capitalization of around $20 billion. Fortune says that combined market cap could balloon to around $911 billion by 2023.

Best Cannabis Stocks to Invest In

Fortune says the STATES Act will not only help eliminate cannabis marginalization, but it will also be a huge catalyst for MSOs. Banks located in states where cannabis is legal could be emboldened by the STATES Act and begin to finance cannabis ventures more freely. Investors will certainly see this access to capital as a bullish development. Fortune says MSO valuations could get a big boost as a result.

The largest MSO in the U.S. today is Curaleaf, which operates in 12 different states. Curaleaf has a market cap of around $4.6 billion. CURL operates 35 dispensaries, 10 processing operations, and 12 cultivation sites.

The next largest U.S. cannabis MSO is Green Thumb Industries. Green Thumb operates in 9 states and has 9 manufacturing locations and 61 retail stores. GTBIF’s market cap is around $3.1 billion.

Finally, the third largest MSO stock is MedMen, which also operates in 12 states. MMNFF has roughly a $1.6 billion market cap. The company has licenses for 76 retail operations and 16 cultivation and processing sites.

In addition to the potential for organic growth among MSO cannabis stocks, the industry is consolidating at a rapid pace. Any of these three stocks could be big buyers or even targets for larger companies in the years ahead.

There’s certainly a lot to like about cannabis stocks and the cannabis industry. But investors should be careful about the buying frenzy that has taken place among the most popular names. While U.S.-listed stocks get all the publicity, CURL stock, MMNFF stock and GTBIF stock may be the cannabis stocks with the most upside.

As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.


Debra BorchardtMarch 20, 2019


 Multi-State Operators Enjoy Significant Cannabis Market Advantages

Multi-state operators are cannabis companies that span across multiple legal cannabis states. They have many significant advantages over single-state operators within the cannabis industry. Multi-state operators own cultivation facilities, extraction/processing facilities, and cannabis retail venues in some of the most highly populated, affluent cities across the states that have legalized cannabis for medical or recreational use.

These entities are usually structured as holdings companies with separate state subsidiaries that hold state licenses for seed to sale activities. They are often a combination of joint ventures, management/ ownership agreements, and outright opened properties. These companies, while not permitted to bring cannabis and cannabis-derived products across state lines, but they can share intellectual property, equipment, branding, and employees across states.

Green Market Report has compiled a list of some of the largest MSO’s in the country. Many of the companies are in the middle of major acquisitions which haven’t technically closed, which makes ranking these companies difficult. These deals are being recognized for the most part and included in the company statistics. It’s also challenging to define which company is the largest as that depends on the metric being reviewed. Active states versus licensed states or operational dispensaries versus square footage of cultivation.

The valuations are based on figures from Yahoo! Finance.



Multi-State Operator Number of Operating States Number of facilities and/or licenses across states. Notes Valuation
Curaleaf (CURA.CN)


13 states, soon operational in KY, OH 42 dispensaries, 12 cultivation sites, and 11 processing sites &

71 stores expected by 2020

$4 billion valuation
Acreage Holdings (ACRG.U)


12 states operational, 19 states licensed 68 retail dispensaries in 12 states, 21 cultivation licenses $1.9 billion valuation
Harvest Health & Recreation Inc.



16 states 70 dispensaries, 13 cultivation facilities, and 13 manufacturing in 2019. Licenses for 200 facilities, 123 retail locations. Harvest Health acquired Verano in $850m all-stock deal. $721 million valuation





12 states 78 licenses for retail locations, 30 operational stores, and 11 cultivation/manufacturing licenses $1.8 billion valuation



11 states 56 retail locations and 14 cultivation and processing facilities. The company acquired MPX Bioceuticals in $835 million deal. $1 billion valuation
Grassroots 11 states 15 dispensaries under operation, 62 licenses. The company has raised $165 million.  Private
Green Thumb Industries



10 states Licenses for 71 retail locations, 11 manufacturing facilities. Acquired Beboe Brands recently $2.8 billion
Cresco Labs



7 states 16 retail locations and 10 production facilities $200 million valuation
Golden Leaf



3 states 7 retail locations, 3 cultivation facilities. Terminated Terra Tech merger $59 million valuation
4Front Ventures 5 states 5 dispensaries with plans to expand to 7. Merging with Cannex Capital (CNNX) $300 million (est.)


2 states 6 operational dispensaries, licensed for an additional 2 stores.  5 cultivation facilities $100 million valuation



2 states 25 dispensaries in Florida, 1 in California and Massachusetts is said to be soon. 2 cultivation facilities  $1.3 billion valuation


Curaleaf is the largest based on valuation. Acreage Holdings is the largest with regards to the number of states it has licenses with. MedMen has the most retail licenses at this time, but Harvest Health has the most open dispensaries at this time. Licenses though aren’t a guarantee that an actual business will open.

MSO Advantages

Advantages for multi-state operators include the ability to react to market trends, avoiding and mitigating problems based on experiences from other states and developing brand recognition at the national level. The most significant advantage is in acquiring state licenses due to having already established licenses and standard operating procedures. States like to see companies that look experienced and have a track record of following compliance requirements. Thus, big established companies have a leg up on local small players when it comes time to award licenses.

However, all this expansion comes at a cost. Seaport Global Securities analyst Brett Hundley wrote, “Most MSOs are operating in the red today while having to access capital on secondary OTC or Canadian stock exchanges.”  He went on to say, “All of the U.S. MSOs have been running around grabbing the best real estate in the U.S., setting up vertical operations state-by-state and cornering the market!” Hundley recently initiated coverage on the group and he had more buy ratings than neutral. He wrote, “We see two large U.S. market opportunities coming into play, with the dispensary recreational market potentially being worth $36B and the medical/ingredient market potentially being worth $58B.”

Investor Checklist

Green Market Report talked to attorney and investment specialist, and author of The Green Regulatory Arbitrage: A Case For Investing In U.S. Multi-state Vertically-Integrated Cannabis Companies David Wenger about investing in multi-state operators.

“The investor should have a second look at those multi-state plant touching companies,” says Wenger, “That’s where a lot of the value is going to be added and driven from in this industry because everyone else is trying to get a piece of that pie that is being basically earned at dispensaries.”

“I’m very positive overall about the multi-state model but especially in the limited license restricted states, but I caution investors,” explains Wegner, “Especially over the last few weeks we’ve seen certain players come to the market say that they’re multiple-state operators and what they are is just an investment fund that holds minority holdings in multiple states. I just caution people to do further digging to make sure you investigate things from multiple sources and make sure that they’re corroborating what you’re hearing from the company.”

Indeed, things can get complicated within multi-state operators; Many acquisitions get announced with great fanfare, but then if the deal goes cold, it is usually quietly brushed under the rug. The cannabis industry is becoming famous for its whirlwind marriages and shotgun divorces. Look for the announcement that says a proposed acquisition actually closed.

Another thing that can be confusing to investors who are trying to make investment decisions is the high expense levels for the MSO’s at this time. Many of these companies are in the empire building stage and that can be very expensive. Plus due to onerous rules and regulations, cannabis businesses can often take months to generate revenue as the companies wind their way through various hurdles.

“It takes money to make money,” said Acreage Holdings Inc. (ACRG.U) President George Allen. He noted that the company is deep in the process of expansion and that doesn’t come cheaply. However, a successful MSO will be one that spends its money wisely. Acreage recently acquired the California dispensary Kanna for $11.5 million, but Allen said that a similar business located not very far away had a price tag that was several times that amount. So while the company wants to grow it will only do so if the price is right.

The Membership of Net Losses

“There’s always strength in size, but that doesn’t always mean they are profitable,” said Gary Rosen of Marcum Advisors.” Right now, that is certainly the case. Most of the MSO’s are reporting net losses. Normally that would cause an investor to worry, but at this stage, the cannabis industry is an emerging one. These companies are spending a lot to get established. Acquiring licenses, setting up cultivation facilities and even making the right hires are all expensive steps.

It may be months, if not years before MSO’s can be analyzed in the way of quarterly comparisons since each quarter is vastly different from the preceding one. However, if some MSO’s continue their high cash burn rates before the revenue can catch up, they will be forced to either raise more money, sell off assets or begin layoffs. After only 12 weeks of business, Cannabis NB was forced to lay off 60 employees. Demand for the product wasn’t the issue, but a lost crop and a lack of proper licensing sent the company into a fast downward spiral.

The Big Get Bigger

There were protests recently at the SXSW festival in Austin, Texas against “corporate cannabis” as small operators are increasingly forced out of the industry.  They don’ have the deep pockets to weather the long runway to profitability that the larger companies have. The larger MSO’s can afford high tech solutions and the latest software to analyze sales and inventory data. They can afford the latest technology in cultivation processes. Small single state businesses are finding it harder to compete and even harder to decline acquisition offers in the millions.

The MSO’s believe that when the country fully legalizes, a national footprint will be the key to becoming an industry leader. The small operator may not survive in the short term. It could follow the pattern of the beer industry, which was initially known for local beers and breweries. Then for years, major brands were the only beers for sale. It’s only been within the last 10 years that craft beers have made a comeback. Craft cannabis will have to fight to hold its place against corporate cannabis.

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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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