MJBizDaily Investor Intelligence

7 MJBiz Daily | Investor Intelligence mjbizdaily.com/investing A bill currently being considered in Colorado could open the state’s recreational and medical marijuana market to hundreds of millions of dollars of outside investment. As proposed, HB 19-1090: Concerning Measures to Allow Greater Investment Flexibility in Marijuana Businesses would allow publicly traded companies and private investment firms to participate in Colorado’s cannabis market, reversing current rules that prohibit such firms from holding marijuana licenses and limits out-of-state owners to 15 people. The bill passed a significant milestone in early March, when the Colorado House Finance Committee voted unan- imously to send it to the House Appropriations Committee. A similar bill was passed during the last term of former Gov. John Hickenlooper, who vetoed the measure. New Gov. Jared Polis has indicated he supports the bill. SECTORS TO BENEFIT While the move would allow a range of new investors and companies to enter Colorado’s $1.5 billion marijuana mar- ket, it also would bolster funding opportunities for existing operators looking to expand in the state . “Private capital is very limited in its current form, and this would present a more symmetrical path forward,” said Kristi Kelly, executive director of Marijuana Industry Group, a Denver-based trade association. “We don’t have the flexibility that our counterparts in other less mature markets have, and we need to fix that.” Kelly expects a ramp-up of private capital as well as an influx of publicly traded companies. Across various cannabis sectors in Colorado, there are several factors for investors to consider. Retail opportunities would be the most likely to benefit from the change—but there may still be lingering concerns among potential investors that Colorado, given its maturity as the first state to legalize recreational marijuana, said Matt Bottomley, analyst at Canaccord Genuity in Toronto. “A change in the bill will result in more opportunities for local operators to be the target of bigger players, but it may not be one of the more attractive markets due to saturation,” he said. “Multistate operators are more likely to be looking at Ohio, Pennsylvania, New Jersey and Illinois.” New Jersey and Illinois are widely expected to legalize recreational marijuana sales within the next year. Some of the larger dispensary chains in Colorado are bigger players in terms of revenue than many of the publicly held vertically integrated companies based elsewhere, not- ed Michael Feinsod, CEO of Denver-based consulting group General Cannabis. Any investment could therefore benefit Colorado-based companies wanting to expand nationally and internation- ally, he added. “The minnowmay be following the whale if multistate operators come here,” he said. “These companies here are much bigger, much stronger, and have four years of bank statements, five years of operational expertise and five years of IRS experience. “There would likely be consolidation here with a focus on becoming a vertically integrated, low-cost producer,” he said. KEY DEAL TOWATCH Should the bill be approved, Denver-based Medicine Man Technologies could grow from a $10 million consulting company into a $40 million operator, said the company’s CEO Andy Williams. Pending the bill’s outcome, Medicine Man Technologies (OTCQX: MDCL)—a cannabis consulting firm—is working to acquire Medicine Man Denver, one of the largest licensed cultivators and retailers in Colorado. While the two entities have some shared ownership, they have remained separate operations because of Colorado’s strict rules governing out-of-state and public market investments. Being able to tap into public market capital and acquire Colorado assets would position Medicine Man Technologies to “expand out-of-state activities and really expand foot- prints both nationally and internationally.” ON THE HORIZON Following a potentially successful vote in the House Appro- priations committee, the bill would pass to a full House vote and to the Senate before landing on Polis’ desk. Lawmakers face a tight deadline to implement the bill by Nov. 1.  MARCH 18 Tilray (Nasdaq: TLRY) The British Columbia licensed producer posted revenue of $10 million in the quarter ended Sept. 30, up 86% from the year-before quarter. Net loss for the quarter was $18.7 million, compared with $1.8 million in the third quarter of 2017. The company said Feb. 20 that it is acquiring hemp foods producer Manitoba Harvest for approximately $319 million in cash and stock. MARCH 26 Cronos (Nasdaq: CRON) (TSX: CRON) The Toronto-based vertically integrated cannabis company reported revenue of $3.8 million for the third quarter ended Sept. 30, compared to $1.8 million for the same quarter in 2017. Shortly after release third-quarter results, the company entered into an agreement with Altria for the tobacco giant to take a CA$2.4 billion stake in the company. The deal closed March 8. MARCH 28 CannTrust Holdings (NYSE: CTST) Ontario-based cannabis producer CannTrust will report its fourth- quarter and full-year 2018 earnings March 28 at 6 a.m. EDT, with an analyst call to discuss the results scheduled for 8 a.m. EDT the same day. Earlier this month, CannTrust filed plans to raise up to CA$700 million for projects including potential acquisitions. What to Watch Earnings Calendar These dates are approximate based on company calendars and releases. Investor Watch Will Colorado’s $1.5 billion marijuana market welcome outside investors? By Nick Thomas