Marijuana: Who Legalizes Next, And Who Wins?

Written by Adam English
Posted June 11, 2019

If you’ve been following the disappointingly stalled legalization efforts this year, there has been some good news.

Illinois finally got its act together and passed a bill that will legalize marijuana by the start of 2020.

The bill contains the normal package of conditions and taxes, along with the now standard beginning to previous-conviction expungement.

There may not be a set timeline for when it is signed by the Governor, but his support is there and it’s basically a done deal.

That may be the only solid movement on the legalization front this year, though. New York and New Jersey are still mired in the details and political infighting.

However, we should look forward to see what’s coming next. We are well into the national election cycle already, and the local and state races are bound to pick up steam very soon.

Let’s take a look.

Round Two For Three States

Several weeks ago, I talked about what I think is the best way forward for New York, New Jersey, and (at the time) Illinois.

At least one of them got their act together and didn’t have to depend on the people to force the issue through a clean referendum.

As for New York and New Jersey? That still may be their only hope of seeing any progress soon.

Internal Democratic Party squabbling tanked the chances of much progress in both states, and Republican legislators didn’t see much incentive to “cross the aisle” in keeping with today’s stupidly partisan zeitgeist.

I suspect Democrats may try to get their “stuff” together in time for the 2020 general election to deliver something to their voter base. However, I wouldn’t bet on politicians of any stripe delivering on a promise.

It may take another election and another round of efforts with some fresh faces to break up the schisms in New York and New Jersey.

What may be more promising is another ballot initiative in Ohio. A similar effort in 2015 failed with 66% against. However, the times have changed, along with the initiative itself.

Support has grown considerably in-state and there was a poison pill baked into the first initiative that would have given just 10 farms permission to supply the whole state.

Without that, the second-round initiative looks far more promising, and polling strongly suggests it would pass if election results are similar.

We should also be keeping our eyes on Arizona and Florida, where ballot initiatives are expected.

Arizona’s 2016 ballot initiative barely failed by 2% in 2016, and Florida seems ripe to expand access after its medical marijuana industry has done so well.

So Who Wins?

In Illinois and Ohio, two names stand out — MedMen and Cresco Labs.

It looks like MedMen is in a good position amongst publicly traded companies to expand into Illinois as quickly as possible.

It is in the process of acquiring PharmaCann in an all-stock deal that transfers six medical marijuana licenses — four for dispensaries and two for growing facilities. PharmaCann also had a presence in Ohio.

Cresco Labs is a small company that recently went through a reverse merger to get listed in Canada, and has a solid position in both states.

Green Thumb Industries should have a strong start in Illinois and is well positioned in Florida.

There are a handful of partnerships with publicly traded companies but there simply isn’t the level of exposure we’d want to focus on rapid expansion in any single state.

Then there's a slew of private companies that we simply cannot access.

And herein lies the problem for us. It is hard for most of the companies to access capital and hard for us to give it to them in exchange for equity.

That is exactly why most of the action is in the multi-state operators. They are the first step in a buyout chain that goes from local million-dollar deals up to international billion-dollar deals.

A wave of buyouts is rippling through the industry right now, and the biggest companies are paying the biggest premiums.

And while MedMen, Cresco Labs, and Green Thumb Industries may not be on our list of the five top buyout targets, I wouldn’t be surprised if they get snatched up before long, too.

Take care,

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Adam English

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Adam's editorial talents and analysis drew the attention of senior editors at Outsider Club, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's page

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