Yet another cannabis executive this week, Verano head honcho George Archos, has predicted a harsh coming year for the broader cannabis industry, with plenty of distressed companies likely going up for sale.
That’s going to be something Verano – along with plenty of other big companies – will be watching carefully, Archos said during the company’s fourth-quarter earnings call Thursday.
“We expect 2023 to be an inflection point for the industry and believe that it will be particularly difficult for smaller operators as they struggle to say afloat in the absence of banking or tax relief and continued pricing pressure,” Archos said. “This is a potential opportunity for Verano to acquire operators in attractive markets at favorable valuations.”
That said, Archos emphasized, Verano won’t be gobbling up every company it can get its hands on, but will be “highly selective” when it comes to M&A activity. Verano just spent 2022 opening another 29 dispensaries in various states, along with another five already in 2023, for a total of 125 operational shops according to the company website.
For now, Archos conceded, capital markets remain tight, so conserving cash is a priority for the company, meaning any deal will have to be a particularly good one for Verano.
Another factor is likely the ongoing losses the company continues to build alongside its national footprint – Verano posted a $269 million loss in 2022, after losing $58 million in 2021. The company only had $85 million cash in the bank at the end of last year.
“There’s no rush for us to do anything” on the expansion front, Archos said, but added that he expects “some deals” in the next two years.
“It’s whatever we think is a great opportunity,” Archos simplified toward the end of the call, saying Verano will consider both entering new markets that may have upcoming cannabis license opportunities as well as acquiring seasoned companies that have footprints Verano can build upon.
“When the public evaluations come down, so do the private ones,” Archos said. “Maybe not as steeply as some of the public evaluations have, but in order to make a deal, it still has to be highly accretive for Verano in order for us to transact.”