Cannabis Industry Daily News

Cannabis MSO Cresco prices Canadian share offering to raise $125 million

Chicago-based multistate cannabis operator Cresco Labs priced an overnight marketed share offering, designed to raise roughly $125 million, at 16 Canadian dollars ($12.56) per share.

The offering of Cresco’s Canadian subordinate voting shares was announced Thursday.

The entire offering will “be purchased by a total of seven new and existing institutional investors, including current shareholder, Wasatch Global Investors,” Cresco said in a Friday morning news release.

The offering, expected to close around Jan. 21, includes a 30-day option to purchase up to 15% more shares.

Cresco shares trade as CL on the Canadian Securities Exchange.

Proceeds from the offering will be used “for organic and inorganic growth opportunities and general corporate purposes.”

“In alignment with our stated strategy, this financing will allow us to make targeted investments within our strategic footprint to go deeper in each state and accelerate our growth,” Cresco CEO Charlie Bachtell said in the release.

“In 2020, we built leading market positions in both Illinois and Pennsylvania, and now it’s time to use the same playbook to achieve market leadership across the remainder of our platform.”

Earlier this week, Cresco announced a deal to acquire Florida medical marijuana cultivator and dispensary operator Bluma Wellness.

In December, Cresco boosted the size of a senior secured loan to the maximum of $200 million.

Judge: California has 30 days to inform marijuana firms about billboard ban

A California judge ruled this week that state marijuana regulators have 30 days to inform businesses of a new ban on billboard advertising.

San Luis Obispo County Superior Court Judge Ginger Garrett ruled in November that billboards advertising cannabis sales or products were illegal under Proposition 64, the 2016 ballot measure that legalized recreational marijuana in the state.

But the billboard ban hasn’t really been enforced, according to CalCoastNews, which prompted Garrett to issue a follow-up ruling Monday giving the state Bureau of Cannabis Control (BCC) 30 days to tell the companies it oversees that any marijuana billboards must be removed.

The judge ordered the BCC to report back to him within 75 days.

The ruling will further shrink advertising options for California marijuana companies, which are already forbidden to use most traditional marketing avenues.

MD cannabis staffers get same COVID vaccine status as health-care workers

Cannabis employees in Maryland will be placed at the top of the list, alongside health-care providers, for receiving the state’s first wave of COVID-19 vaccinations.

That status further confirms the “essential” designation that cannabis businesses and their workers received when the coronavirus pandemic began.

According to the Baltimore Business Journal, the Maryland Medical Cannabis Commission alerted the more than 130 licensed cannabis companies across all sectors that their employees will be eligible for Phase 1A of the state’s tiered vaccine distribution plan.

The state health department issued directives stating that registered employees at medical cannabis dispensaries, labs, cultivation sites and processing sites are “registered health care providers.”

A representative of SunMed Growers told the Baltimore Business Journal that employees at the Cecil County-based company have begun signing up for the vaccine, with some set to receive their first dose by week’s end.

Marijuana MSO Cresco inks $213M all-stock deal to expand into Florida

Marijuana multistate operator Cresco Labs entered a definitive agreement to acquire Bluma Wellness for $213 million in an all-stock transaction in a move to expand into Florida’s fast-growing medical cannabis market.

Bluma, under its operating subsidiary “One Plant Florida,” has seven dispensaries in the southern state with eight additional locations planned.

One Plant ranks 11th in Florida in the number of dispensaries but is in the top five in per-store sales of smokable flower, according to state data. Bluma also has 54,000 square feet of cultivation space.

The deal reflects how merger and acquisition activity has been heating up in the marijuana space and how investor sentiment is brightening since Democrats won control of the U.S. Senate.

“Our strategy at Cresco Labs is to build the most strategic geographic footprint possible and achieve material market positions in each of our states,” CEO Charlie Bachtell said in a news release.

“With Florida, we will have a meaningful presence in all seven of the 10 most populated states in the country with cannabis programs – an incredibly strategic and valuable footprint by any definition.”

Bachtell said Chicago-based Cresco identified Bluma because of its “best-in-class cultivation facility,” effective delivery operation and strong management team.

Bluma said its shareholders will receive 0.0859 of a subordinate voting share of Cresco Labs for each Bluma share held.

The Florida company said it anticipates the transaction being completed by the start of the second quarter, pending shareholder, regulatory and other approvals.

New York-based Cowen, which acted as a financial adviser to Cresco in the deal, said in a research note Thursday that Florida was on the “short list” of priority markets for Cresco.

The acquisition, Cowen analysts wrote, represents a 29% price premium over Bluma’s share-price close on Wednesday and “appears to reflect the market’s perceived benefit of the Democratic party taking a slim majority in the U.S. Senate.”

Marijuana Business Factbook projects that Florida’s MMJ sales will reach $1 billion-$1.225 billion in 2021, which represents roughly a doubling over two years.

Bluma stock, which trades on the Canadian Securities Exchange under the ticker symbol BWEL.U and on the U.S. over-the-counter markets as BMWLF, was up more than 15% in morning trading.

Cresco Labs, which trades on the CSE as CL and the OTC markets as CRLBF, was up about 7% in early trading.

Cannabis firm Aphria grows Q2 revenue, reports CA$120.6M net loss

Canadian cannabis company Aphria on Thursday reported increased quarterly revenue for the quarter ended Nov. 30, with a net loss of 120.6 million Canadian dollars ($95.3 million).

The Ontario-based firm posted net revenue of CA$160.5 million, a 10% increase over the previous quarter.

Net cannabis revenue comprised CA$67.9 million of Aphria’s net quarterly income, compared with CA$91.7 million in international distribution revenue from its German subsidiary, CC Pharma, and CA$881,000 in net beverage alcohol revenue from its U.S. subsidiary, SweetWater Brewing.

Adjusted EBITDA, a measure of profitability, was CA$12.6 million.

Aphria claimed the No. 1 position in Canada’s adult-use marijuana market during the quarter with a 13% share, citing November 2020 data from Seattle-based cannabis analytics firm Headset that covers some major Canadian markets.

On a Thursday earnings call, Aphria CEO Irwin Simon said the company believes recreational marijuana legalization in Europe “will happen sooner (rather) than later.”

Simon, who was Canada’s highest-paid cannabis executive in 2019, has previously asserted that Germany will become Europe’s first legal recreational cannabis market, although that prediction has not yet played out.

Asked by an analyst to explain his optimism about European legalization, Simon cited “intel” from his staff that it “could happen this year.”

“That’s what I’m hearing back from lobbyists and our political relationships over there,” he said.

“Europe is usually a lot more progressive than the United States. So that’s why I see legalization happening in Europe sooner than later.”

With increasing odds of federal reform of cannabis laws in the United States in the wake of a Democrat-controlled Senate, Simon said Aphria is “ready and well-positioned for it.”

Aphria is due to merge with competitor Tilray this year, and Simon said Tilray’s Manitoba Harvest hemp foods subsidiary, along with Aphria’s Sweetwater subsidiary, will “provide us with thousands and thousands of distribution points for our products across the natural-, mass-, club- and grocery-sales channels, as well as via e-commerce.”

David Klein, CEO of Aphria competitor Canopy Growth, recently told Canadian business news outlet BNN Bloomberg that he expects to enter the U.S. within a year, capitalizing on its opportunity to buy U.S. multistate operator Acreage Holdings if the U.S. legalizes marijuana at the federal level.

Simon outlined how Aphria’s U.S. strategy differs from Canopy’s.

“Going out and buying a piece of a company today is something that we can easily do,” he said.

“But I like the idea of buying assets, like we did with Sweetwater or Manitoba Harvest, that can easily translate into legalized cannabis THC products when the market allows.”

Simon also raised the possibility of importing Canadian-produced cannabis into the U.S. but acknowledged the many unknowns surrounding U.S. legalization.

“I hate to get out in front and guess, and go in there and make big bets for our shareholders, and make big bets with an unknown, is not something I would let Aphria and Tilray do,” he said.

But when U.S. federal legalization does occur, Simon added, “we’ll be ready to buy, to partner, to greenfield.”

“I think that’s what’s important, that we’re circling the wagons instead of getting on the wagon now.”

Aphria trades as APHA on the Nasdaq and Toronto Stock Exchange.

Solomon Israel can be reached at [email protected]

Colorado hits $2B for 2020 marijuana sales – with December still to count

The oldest adult-use marijuana market in the United States, Colorado, hit a milestone in 2020 when sales surpassed $2 billion for the first time in a calendar year.

And that total did not include sales figures for December.

According to the Denver Post, sales for the month of November were $175.1 million, including $140.5 million on the recreational side and $34.7 million on the medical side, according to statistics from the Colorado Department of Revenue.

Though November sales were actually a decrease from October’s, they were enough for Colorado to reach the $2 billion mark for 2020.

The previous year, by contrast, marijuana sales in Colorado totaled $1.75 billion.

New Jersey cannabis company workers sign up with union

Employees at New Jersey cannabis company Verano NJ voted to ratify a union contract with local chapters 152 and 360 of the United Food and Commercial Workers (UFCW).

According to a union news release, workers at the company decided to organize to ensure their rights are protected and acknowledged.

Verano NJ, which is licensed to grow and process medical cannabis in New Jersey, employs 80 workers. The company recently held a series of community job fairs to grow its workforce.

“Everyone wins when a mutually respectful, union-business relationship exists,” said Hugh Giordano, Local 152 representative.

“This agreement extends our commitment to employees in this exciting young industry, and it will assist Verano NJ in accomplishing its goals in a way that benefits host communities.”

There is an increasing amount of union activity in the marijuana sector.

Workers at Pennsylvania cannabis company CannTech signed a UFCW contract in December, and similar moves were made in Washington DC and Rhode Island in October.

Also, the UCFW recently claimed victory in a lengthy dispute with three California companies over employee wages.

Maine marijuana testing lab closed over licensing issue

(This story has been updated with more information from Maine’s Office of Marijuana Policy.)

Massachusetts-based marijuana testing company ProVerde Laboratories shut down its Portland, Maine, location after municipal authorities said it was operating without the necessary local authorizations.

The closure was first reported by the Portland Press Herald.

A December evaluation by Portland authorities “revealed that (ProVerde was) operating a marijuana business out of the commercial property at 220 Industrial Way without a permit, certificate of occupancy, or business license,” according to a notice of violation dated Dec. 15 and shared with Marijuana Business Daily by city officials.

A permit application to change the status of the unit from a warehouse or storage location to a laboratory “is still in review and has not been approved or issued at this time,” according to the notice.

“You currently do not have city approval to operate a marijuana business, as you have not completed the change of use process and do not have a certificate of occupancy for laboratory use.”

ProVerde also hasn’t applied for a “marijuana testing facility business license,” the notice said.

City officials warned ProVerde that if it didn’t stop operating, it could be disqualified from holding a marijuana business license in Portland for five years.

A reinspection is scheduled for Feb. 2, according to the notice.

ProVerde did not immediately respond to requests for comment from MJBizDaily on Wednesday.

However, the company’s Chief Scientific Officer Christopher Hudalla told the Press Herald “he was not aware licensing was required for medical marijuana testing, only recreational or adult use, and is seeking clarification from officials.”

ProVerde received a temporary license from Portland in April 2020 that has since expired, the Press Herald reported.

Hudalla told the newspaper the company plans to get another license.

Maine’s Office of Marijuana Policy (OMP) said the state has “at least seven establishments currently or soon-to-be providing testing services of some form to medical marijuana-related businesses in Maine,” including ProVerde.

“Testing is only mandatory in Maine’s adult use marijuana program,” OMP spokesman David Heidrich wrote in an email to MJBizDaily.

“So for the last several years, testing facilities operating in Maine have been providing voluntary testing to interested medical registrants and have not been formally registered with OMP.”

– Solomon Israel

Virginia looks poised to legalize adult-use cannabis market

Virginia Gov. Ralph Northam’s administration announced an adult-use cannabis legalization plan that would impose a 21% excise tax and provide some licensing preferences for individuals and entities harmed by the war on drugs.

Adult-use marijuana sales would begin Jan. 1, 2023, under the proposal, which looks as if it has a good chance of succeeding in this year’s Legislature, according to the Richmond Times-Dispatch.

Northam, a Democrat, said in November he would press for an adult-use marijuana program.

Virginia is among the states eyeing legal marijuana as a way to boost tax revenues to help offset the economic impacts of the coronavirus pandemic.

Voter approval of adult-use legalization in New Jersey in November also has put pressure on states in the Mid-Atlantic and Northeast regions to act.

New York Gov. Andrew Cuomo last week renewed his push for recreational marijuana legalization in his state.

The Virginia measure is expected to receive broad support from lawmakers. Both the state House and Senate are controlled by Democrats, and Virginia’s Black Caucus on Wednesday endorsed the administration’s proposal, the Times-Dispatch reported.

The legalization plan, which seeks to help communities most impacted by past enforcement of marijuana laws, would include some low- and no-interest loans and fee waivers for eligible individuals and entities.

Sales reportedly would be limited to an ounce of marijuana.

Local jurisdictions would be able to add a tax of up to 3%. The overall tax rate would be roughly 30% when adding the 21% excise tax, local sales taxes and the optional local tax.

Virginia launched a limited medical marijuana program in October 2020.

The state limited licenses to five vertical operations, making the market attractive to licensees who also are eyeing adult use.

Massachusetts marijuana regulator taps attorney to fill vacant seat

Dorchester lawyer Ava Callender Concepcion was chosen to fill the remaining open position on the Massachusetts Cannabis Control Commission.

State Attorney General Maura Healey appointed Concepcion, who formerly served as director of the Suffolk County District Attorney’s Office and advised on policy and legislation, according to the Boston Business Journal.

Concepcion joins two other new board members whose duties began in January:

  • Nurys Camargo, who took the agency’s social justice role for a five-year term.
  • Bruce Stebbins, who is also serving a five-year stint.

Returning commissioners are Jennifer Flanagan and Chair Steven Hoffman.

The newly restocked group will meet Thursday with a focus on implementing rules and managing an adult-use cannabis industry that passed the $1 billion mark in total sales in 2020.

Cannabis MSO MedMen raises $10M to aid financial-turnaround effort

Multistate cannabis operator MedMen Enterprises said Tuesday it raised $10 million in capital by amending a senior secured debt facility led by Gotham Green Partners.

That facility and other debt amendments announced at the same time will dilute the value of MedMen stock. But the amendments also reflect an effort to dig the cash-strapped, Los Angeles-based operator out of a financial hole.

According to a news release, MedMen’s directors have unanimously “determined that the company is in serious financial difficulty, that the amendments are designed to improve the company’s financial position, and that the amendments are reasonable in the company’s circumstances.”

MedMen Chair and interim CEO Tom Lynch put a positive spin on the situation, saying in a statement, “We are excited to announce continued support from Gotham Green Partners as we continue to execute on our turnaround plan and look to grow our business.”

Under the terms of the $10 million transaction, MedMen is issuing 62.2 million stock warrants, each of which can be exercised at 16 cents per share for five years after they are issued. The stock currently is trading near that level.

MedMen showed modest improvement in growing sales and controlling expenses in its most recent quarter ended Sept. 26, 2020, but the company finished the period with a negative shareholder equity of $192.3 million.

Analysts wrote then that MedMen’s debt load was high and the “risk of further dilution remains high.”

Also, MedMen has announced management changes in the past month:

Multiple marijuana businesses sue Michigan city over licensing process

Ten marijuana companies filed suit against the Detroit suburb of Berkley, Michigan, in an attempt to overturn a license scoring process that left all of them without business permits.

According to C&G Newspapers, the city identified three cannabis companies as top scorers for marijuana business licenses and left out 27 additional applicants that had thrown their hats in the ring.

Subsequently, 10 of the companies filed two separate lawsuits against Berkley, alleging that the scoring criteria were not defined or explained and that the city “improperly delegated authority” in the decision-making process.

Lawsuits such as this have become increasingly common in U.S. markets where there are competitive application processes for a limited number of marijuana business licenses.

The three top scorers currently in line for licenses in Berkley are Quality Roots, Operation Grow and Attitude Wellness.

The 10 plaintiffs in the cases are:

  • 123 Ventures.
  • Berkley Herbal Center.
  • GS Ashley.
  • Fire Farm.
  • Nature’s Remedy.
  • Oak Flint.
  • Pure Life Berkley II.
  • Pure Life I.
  • Pure Roots.
  • Yellow Tail Ventures.

The lawsuits requested an injunction to halt the licensing process.

The Berkley city manager told C&G Newspapers that no companies have been yet awarded or denied business licenses and that the city was undergoing an appeals process when the two suits were filed.