Is cannabis multistate operator Harvest Health in hot water – or just busy cutting deals?

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Harvest Health, Is cannabis multistate operator Harvest Health in hot water – or just busy cutting deals?

To a casual marijuana industry observer, it might seem that Arizona-based Harvest Health & Recreation has taken to heart the adage, “All publicity is good publicity.”

Harvest, a multistate operator with a footprint in eight states, has become one of the more high-profile marijuana companies in recent months in part because of a string of industry headlines.

The business has negotiated several acquisition victories over the past year.

But it’s also attracted attention for licensing challenges, scuttled deals and legal disputes that some industry experts believe could make the firm’s investors nervous. Harvest trades on the Canadian Securities Exchange under the ticker symbol HARV and on the over-the-counter markets as HRVSF. 

Most recently, the company was hit with two lawsuits from former employees who alleged they were forced to resign. Harvest disputes the claims.

And that’s just the tip of the iceberg.

Other Harvest-related headlines in recent months include:

  • An eyebrow-raising $80 million deal in April to sell many of the California assets it acquired from Seattle-based Interurban Capital Group (ICG) only a month earlier to cannabis magazine publisher High Times Holding Corp. Harvest also revealed it’s in litigation with ICG related to the March purchase, which included the Have a Heart dispensary group.
  • The scrapping in March of a blockbuster $850 million merger with Chicago-based Verano Holdings and the resignation of Harvest’s executive chair, Jason Vedadi. Also in March, Harvest successfully executed acquisitions of Pennsylvania-based Franklin Labs and the aforementioned ICG.
  • February purchase of home-state competitor Arizona Natural Selections, which added three operational MMJ dispensaries and the right to open a fourth, along with two cultivation sites and land for a third, to Harvest’s portfolio.
  • A legal dispute in January over a terminated acquisition of California-based Falcon, in which Harvest filed suit to recoup $50 million it paid the company before the acquisition fell through. The same month, Harvest acquired a Nevada cultivation and manufacturing facility from MJardin.
  • Troubles last August in both Ohio and Pennsylvania, where the company ran into licensing difficulties for several medical marijuana dispensaries and a cultivation facility.

At the end of 2019, Harvest had $22.6 million in cash, compared with an operating loss of $108 million for the year and an EBITDA of negative $34.8 million.

Harvest’s cash position has since improved. On an April 7 earnings call, CEO Steve White informed investors the company’s cash balance was $85 million. Its debt totaled $250 million.

Despite the flurry of positive and negative headlines, White doesn’t see his company as having gone through a particularly crazy ride over the past several months.

“The public markets and the stock prices going up and down – and the articles that get written – make it appear that it’s a roller coaster. But we’ve never been more focused on our core business than we are today,” White told Marijuana Business Daily.

He is confident the company has made the right moves to position itself for the future.

This year, White said, Harvest will focus on boosting its footprint in Arizona, Florida, Maryland and Pennsylvania – markets where it already holds interests.

“In 2019, we spent a lot of money on expansion,” he said. “In 2020 and 2021, we look forward to reaping some of the benefits of those investments.”

Harvest already owns or controls 35 retail storefronts and 11 cultivation or manufacturing facilities in eight states, and that footprint is poised to expand this year, White said.

Turbulence raises questions

Still, some of the recent developments have led some industry watchers to question what’s happening inside Harvest as the company navigates treacherous business waters while the nation confronts a major economic downturn.

“It’s a crazy industry, but I don’t think (Harvest is) the norm,” said Matt Karnes, the founder of GreenWave Advisors in New York City. “I think they’re struggling to keep up or stay in the same league as the darlings of the industry.”

Karnes cited other MSO’s as the “darlings” he thinks are atop investors’ lists, such as Green Thumb Industries, Cresco Labs and Curaleaf, which some view as more stable than Harvest. He also pointed to the former employee lawsuits and the High Times deal, and compared the latter to house-flipping since many of those assets were bought barely a month earlier.

“Something doesn’t sit right. … Where there’s smoke – as we learned with MedMen – there’s fire,” Karnes said.

“As it gets more difficult to navigate the ship, it just raises more uncertainty. And it doesn’t seem like (Harvest is) equipped to weather that storm, as (other MSOs) are poised to do.” 

But California attorney Joe Rogoway doesn’t think it’s that simple.

Rather, he sees Harvest’s ups and downs as emblematic of larger industry trends, including the retreat of institutional capital that began in 2019 after cannabis stocks plummeted.

That doesn’t mean there’s anything inherently wrong with Harvest’s business model or decisions, Rogoway stressed.

“The thing that you get here is that it’s the whole elephant,” Rogoway said. “A lot of businesses, you might have just the ear or the trunk or the tail. Here, Harvest Health has the whole elephant of problems.”

Regarding the failed acquisitions and various legal disputes, Rogoway said: “Transactions that have fallen apart for various reasons, like partnership disputes… There’s just so much of that happening right now (in the industry). It’s everywhere. It’s ubiquitous.”

Asked for his macro-level view of Harvest’s situation, Rogoway said much of it can be traced back to financial issues plaguing the global marijuana market.

“What I see are a bunch of situations that are at least caused through inadequate capital,” he said. “That’s not to say they can’t do what they are trying to do but that it’s just a problematic industry in the sense that there’s a lot of volatility.”

What’s next for Harvest

White told MJBizDaily that selling 13 California retail outlets to High Times fit a strategic plan he put together for Harvest, and he denied that the goal was to flip the properties, as Karnes suggested.

“That wasn’t the intent,” White said, adding that Harvest’s March purchase of ICG “came with a lot of things,” including a capital raise and multiple experienced staffers who have backgrounds working in capital markets. Those assets, he said, will be “critical” to Harvest’s long-term plan.

And, White noted, the California assets purchased from ICG were not the same package of shops sold to High Times.

Harvest also retains multiple retail shops in California, White said, and will be actively pursuing more.

He said the aim of the High Times deal was to divest from at least part of California in order to invest more resources into developing the company’s footprint in other states where Harvest is more bullish.

White also said he’s not worried about the employees’ recent lawsuits.

“That’s a case where the plaintiffs have alleged violation of laws that no longer exist,” he said. “So those fall into the category of litigation we take less seriously.”

White noted he’ll be prioritizing one thing this year: profitability.

“What we’re doing is going back to our roots as an organization, and we’re going to be running a tighter ship and more profitably,” White said. “You’ll start to see us acting like who we have historically been as an organization, which is a really boring company that tells people what we’re going to do and goes out and does it.

“We’ll probably fall out of the headlines for some period of time – until we don’t.”

John Schroyer can be reached at