The Cannabis Industry’s Top 12 U.S. Multi-State Operators

 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)

(CURLF)

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)

(ACRGF)

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

(HARV.CN)

(HRVSF)

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

 

MedMen

(MMEN.CN)

(MMNFF)

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

(IAN.CN)

(ITHUF)

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

(GTII.CN)

(GTBIF)

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

(CL.CN)

(CRLBF)

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

(GLH.CN)

(GLDFF)

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.)
TerraTech

(TRTC)

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

(TRUL.CN)

(TCNNF)

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.

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


13 comments

    • Debra Borchardt
      Debra Borchardt

      March 20, 2019 at 5:09 pm

      Hi Nicholas,
      The valuations were credited to Yahoo Finance. Please let us know where the counts are incorrect. We received most of this data from the companies themselves.
      Thanks for the feedback.

      Reply

  • Avatar
    Gary DeFilippo

    March 20, 2019 at 8:09 pm

    Excellent article! Thank you for the compilation!

    Reply

  • Avatar
    Maki

    March 23, 2019 at 12:48 am

    Good read.

    Reply

  • Avatar
    ara Ohanian

    March 26, 2019 at 1:41 pm

    Great article, Debra. In your research, do you foresee MSO’s Branded CBD products becoming vulnerable to counterfeiters? Do you think MSO’s concerned about this?

    Reply

    • Debra Borchardt
      Debra Borchardt

      March 26, 2019 at 4:36 pm

      That is possible, but I think it is a long way away. I think the danger isn’t with the MSO’s but all these fly by night CBD companies.

      Reply

  • Avatar
    KB

    March 28, 2019 at 4:17 pm

    The valuations that you provide are quite misleading. Given the fact that capital raises, acquisitions and mergers are all funded primarily with equity in the MSO space, fully diluted market cap is far more telling than market cap based on outstanding shares. Here’s a good resource that shows fully diluted caps of MSOs: https://www.statesidecannabisinvestors.com/

    Reply

    • Debra Borchardt
      Debra Borchardt

      March 28, 2019 at 5:36 pm

      As we noted the market caps are taken from Yahoo Finance.

      Reply

      • Avatar
        KN

        March 28, 2019 at 6:54 pm

        You also asked us to notify you where corrections are needed. The website I linked provides a current accounting of fully diluted share counts and market caps, updated every weekend. Just thought you might want to provide a more accurate picture, as a number of the current mkt caps that you provide are off by a few billion dollars.

        Reply

      • Avatar
        KB

        March 28, 2019 at 6:57 pm

        Also, I noticed that another commenter noted that the license counts were off. Again, the website I’ve linked keeps a current tabulation of those counts that is updated as news is released. I definitely recommend checking it out and updating this article. It’s a great read, but the numbers in the table are counterproductive if they aren’t correct.

        Reply

        • Debra Borchardt
          Debra Borchardt

          March 29, 2019 at 10:07 am

          Dear KB,
          GMR’s goal is to treat cannabis companies like any other industry. As such, we’ll continue to use the Yahoo Finance or Nasdaq Market data. The website you are referring to does not state anywhere on its site where it retrieves its data and has little information as to who is running the website. You want us to use this data versus a well-established provider. Let’s take Acreage Holdings ACRGF, Yahoo lists its market cap at $2.3 billion, Schwab lists it at $858m, your referenced site puts it at $2.6 billion. Again, we will stick with established data providers. With regards to licenses, many of these companies provided the numbers for us. Tell us one that is off and we will ask the company themselves to confirm. So far only one company has asked for an update and we did so.
          With regards to the website you referenced, my suggestion is that they publicly state who they are. We at GMR post all of our information. We are real people that stand behind our work.

          Reply

          • Avatar
            KB

            April 2, 2019 at 7:03 pm

            “Tell us one that is off and we will ask the company themselves to confirm. So far only one company has asked for an update and we did so.”

            Honestly, almost all of them are off. But let’s look at Harvest Health and Rec. First, you list the Verano deal as complete. It definitely is not complete. Second, you list a market cap of $721M? Does that include Verano, since you list it as closed? If so, the pro forma fully diluted count is actually 415M shares, for a market cap well north of $3B.

            I get the feeling you don’t want to put in the work to get this right. Nor do you want to acknowledge that your numbers are inaccurate. If both are true, why even put this up there? It misleads investors. Do you really want someone thinking Harvest is <$800M market cap?!

          • Debra Borchardt
            Debra Borchardt

            April 2, 2019 at 11:23 pm

            Dear KB,
            I have put numerous hours into this piece. It is a news story and not intended to be an in-depth analytical report. We don’t have the resources that say an equity research firm may have. I have worked at numerous news outlets and we have all frequently used free data like Yahoo. We can’t afford expensive data providers. In addition, we have limited labor resources. As I stated, I reached out to each company to confirm the numbers and you are saying that the information from the companies themselves is is incorrect. The MSOs keep making acquisitions and the numbers are constantly changing, so this is what they were at that moment.

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