Two of Washington’s largest recreational marijuana chains on the selling block

By John Schroyer

Washington state’s two top-selling cannabis retailers are for sale.

Main Street Marijuana owner Ramsey Hamide and Uncle Ike’s owner Ian Eisenberg, who own three storefronts apiece, have united in an attempted joint sale of both companies, they told Marijuana Business Daily on Monday.

The asking price for all six shops? A cool $50 million.

The move underscores how some cannabis entrepreneurs are taking the opportunity to unload their businesses while they are strong and can command a hefty price tag – particularly ahead of the uncertain period created by the incoming Trump administration.

The $50 million asking price – and the two retailers’ sales gains – also reflects the torrid growth in the nation’s recreational marijuana industry.

Hamide said the price tag is justified given that Main Street Marijuana is the top seller of Washington cannabis and Uncle Ike’s is a close second, according to sales figures reported on the website 502data.com, which compiles state government data.

“Collectively, between us, we did $50 million in revenue last year,” Hamide said. “It’s realistically priced for the right buyer. Whether anyone is going to come forward with the uncertainty with (President-elect Donald) Trump and (U.S. attorney general nominee Jeff) Sessions, I don’t know.”

Hamide and Eisenberg were among the early adult-use license holders in Washington after voters there approved recreational marijuana in 2012. The duo said they want out so they can explore other opportunities in the marijuana industry.

They aren’t the only ones to put up a for sale sign.

In Colorado, some of the early recreational business owners also have sold or attempted to sell their businesses, including Denver Relief and 3D Cannabis Center, which garnered worldwide media attention when it conducted what is largely regarded as the nation’s first state-legal recreational marijuana sale.

All told, the six locations owned by Hamide and Eisenberg have sold more than $71.2 million since adult-use sales began in July 2014, according to 502data.com, though the two original locations both dwarfed the other four.

Main Street Marijuana’s first shop in Vancouver, Washington, has racked up $34.3 million in sales, while the original Uncle Ike’s in Seattle has sold $30.4 million worth of marijuana since opening its doors.

By comparison, the lowest-selling Main Street Marijuana location, in Longview, has $2 million in total sales to date, and the lowest-performing of Uncle Ike’s three Seattle locations has accumulated $256,038 in sales.

Hamide said 2017 could be an even bigger revenue year than 2016 for the six stores.

“Projecting into 2017 … the revenues could be $65 million-$70 million,” Hamide said, noting that any buyers would “quickly make back that investment (of $50 million) in just a handful of years.”

Section 280E of the U.S. tax code dampens profit margins on those revenues, of course.

But the sheer sales figures alone would likely make for a handsome profit for potential new owners, Hamide said.

“The store downtown, our tax return might say we made $12 million. But the reality is, after we pay the federal taxes and after you pay all the associated expenses, maybe the owners made $4 million or $3 million,” Hamide said. “I think it’s a fair valuation, but marijuana businesses are hard to value.”

Hamide said he’s ready to sell and move on to new cannabis-related ventures, such as getting involved in Native American marijuana businesses.

But he said he would also be happy to continue as owner of Main Street Marijuana.

Eisenberg gave a similar reply, saying he “might want to go into a different aspect of the industry.”

Both owners may face some hurdles when it comes to selling, given there’s a six-month residency requirement in Washington state for ownership of any licensed marijuana business, said attorney Ryan Agnew.

That means wealthy entrepreneurs or existing cannabis companies in other states would have to find local partners if they want to purchase some or all of the locations.

“I could see somebody biting, but the residency requirement will be difficult,” Agnew said. “I don’t know how many people in Washington have an extra $50 million kicking around, but it’s possible.”

Still, Hamide is hopeful the right buyer may emerge, even if it’s a Washington resident with out-of-state financial backing who plans on running the shops.

There’s also a prohibition on a single individual or company possessing more than three cannabis business licenses, which means it would be either difficult or impossible for a single buyer to take all six storefronts.

But if the right business partners came along with the right business structure and were able to make one big purchase work through some kind of loose partnership, Hamide said he and Eisenberg would at least have a discussion about such a sale.

Regardless, Hamide said, he’s open to selling the business one store at a time.

“We would be willing to entertain those offers … from a vetted and qualified buyer,” Hamide said. “They can have their pick of any of the six stores, and if it was an individual buyer, they could have up to three (storefronts).”

The pair are open to selling all of their intellectual property and brands along with their business licenses and locations, Hamide said.

Any potential owners could therefore step in and take over with minimal changes to the businesses, although that may not be the case if the six shops are sold separately to different buyers.

If new buyers continue the business models that have made both companies as successful as they have been to date, Hamide said, “the future is extremely, extremely bright.”

John Schroyer can be reached at [email protected]

3 comments on “Two of Washington’s largest recreational marijuana chains on the selling block
  1. Bill Davidson on

    We are considering the value of homeopathic/aryuvedic medicines as in life – extension for chronic illness. When you are dying $50 million doesn’t mean a whole lot considering the lack ‘of fun’ not funding. Pot is fun medicine BUT we are trying to get our INSURANCE to cover ALL of IT; including the Golden Seal for afterwards. .com million is not on my prescription pad….how about yours….

    Reply
  2. Andrew Collier on

    Call me if you are thinking of paying anything close to these valuations in the MJ industry. I’ll talk to you about the reality of the MJ business (not the media look), business/accounting risks, and fundamentals of what gives a business long-term value. I love being on due diligence teams that destroy pie in the sky assumptions keeping manic valuations afloat. My first question for would be buyers would be what’s your investment philosophy and time horizon? 2nd, if not addressed in the first answer, what is your understanding of competitive strategy and the process of “creative destruction” in markets? My 1st question for the sellers would be what are the compliance and accounting software apps they’ve been using for generating their business and compliance data, and can I do an audit? I’ve yet to see data in this industry that is trustworthy and the asymmetric info between buyer/seller in private sales in a an illegal industry is a lot to overcome. If good data is out there, I’d love to know what system and managers are creating it. Revenue recognition, what is that, we’re cash based? Tax footnote disclosure, really? Wouldn’t that let everyone know how our business is unsustainable as the world stands today? Someone told me that ancillaries don’t have to worry about filing the IRS forms for large cash receipts, and the BSA/AML laws don’t apply to us since we aren’t plant touching, right? The lack of basic risk awareness and buyer beware attitude in this industry is worrying, to say the least. Despite what most seems to think, unrealistic high valuations are not really good for anyone long-term, they mis-allocate capital and eventually hurt fundamentals and reputations, even if a few foxes sneak off with a hen or two. Maybe after a few more millions in destroyed savings/capital the hype will give way to reality. Doubt many here will, but read The Intelligent Investor. Buffett says you only actually need to read the two chapters on manic “Mr. Market” and how to value a business. If you want to discuss (or argue) and learn from each other, here is my LNKD too.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *