New banking laws could be on deck for cannabis and hemp companies operating across the United States, as the Senate Committee on Banking, Housing and Urban Affairs commenced hearings at the end of July. As American support for marijuana legalization remains at an all-time high (61% in 2018 according to the General Social Survey), the market is keeping an eye on what multi-state operators (MSOs), such as Jushi Holdings Inc. (NEO: JUSH.B), Curaleaf Holdings, Inc. (CSE: CURA), Harvest Health & Recreation Inc. (CSE: HARV), MedMen Enterprises Inc. (CSE: MMEN), and iAnthus Capital Holdings, Inc. (CSE: IAN) could possibly gain from the Secure and Fair Enforcement (SAFE) Banking Act.
The passing of the SAFE Banking Act could help an MSO like Jushi Holdings Inc. (NEO: JUSH.B) grow its US national footprint. With each new regulation change, comes a reaffirmation of Jushi President Erich Mauff and his team’s decision to take Jushi public.
“We needed that liquid currency for potential future acquisitions,” Mauff told the Financial Post when asked why he chose to take his company public.
Should the SAFE Act pass, the entire cannabis sector could potentially benefit from this new law. If passed as it is currently written, the SAFE Act would protect banks from federal prosecution as long as the cannabis businesses they work with comply with the laws in the states where they operate. Companies like Jushi Holdings Inc. (NEO: JUSH.B) who value and place a high importance on regulatory compliance could potentially be one of the beneficiary MSOs.
GROWING CONFIDENCE ALLOWING MSOs TO EXPAND STATE BY STATE
Through the acceleration of its growth strategy since Jushi Holdings Inc. (NEO:JUSH.B) began trading in June of this year, the company continues to build its presence across the U.S. through investments and partnerships in target states like California, New York, Nevada, Ohio, Pennsylvania, Virginia, and in the Midwest. Additionally, Jushi is currently pursuing strategic initiatives for cultivation and processing in Europe.
Having raised over $135 million over the last 18 months, Jushi is establishing itself as a globally-focused multi-state cannabis and hemp operator.
“Upon the successful closing of our go-public transaction and the raise of $68.2 million in an oversubscribed private placement, Jushi strengthened its balance sheet and accelerated our growth strategy. My team and I have leveraged our financial and operating expertise and successful investing history in the cannabis space to identify and deploy capital strategically into attractive opportunities in limited license states and jurisdictions,” said Jim Cacioppo, CEO and Chairman of Jushi.
HOW CANNABIS OPERATORS BUILD AN MSO PRESENCE
In just a few months, Jushi Holdings Inc. (NEO: JUSH.B) has implemented its plans and continues to successfully execute a multi-pronged strategy of purchasing licenses, winning applications, and acquiring successful businesses to increase its presence. During that time, the company has introduced new branded products capitalizing on the brand equity of its medical and adult-use brands, BEYOND /HELLO(tm), The Clinic(tm), The Lab(tm), and The Bank(tm).
Furthermore, Jushi is expected to launch new branding and a series of hemp-derived physician-formulated CBD products that are in development in the Fall of 2019.
Jushi opened the first retail location of its Sound Wellness subsidiary, SW Retail Stores, LLC, a full spectrum CBD store located within the Dent Tower in Amherst, New York. This store sells full-spectrum CBD products, including physician-formulated phytocannabinoid-rich oils derived from top quality hemp plants for promoting restful sleep, relaxation, and general well-being. So far, the line’s initial product offering consists of tinctures, soft gel caps, and topical lotions, with a unique Swiss-made, hemp-derived CBD lozenge in development.
Sound Wellness LLC, a subsidiary of Jushi, received approval for its industrial hemp-CBD processor license application in New York. Additionally, the company is working to purchase over 100 acres of hemp from New York-licensed hemp farmers this fall to support the company’s initiative to create product innovations centered around the untapped potentials of hemp.
In Pennsylvania and California, the company is in the process of opening several retail locations. In July, the company closed an acquisition of 100% ownership of the membership interests in four retail dispensary businesses with the ability to collectively open up to 12 locations in Pennsylvania. The existing retail dispensary brand, “BEYOND /HELLO”, currently has five operational dispensaries with locations in Bristol, Johnstown and Scranton and two in Philadelphia. The retail dispensaries are strategically located near major interstate highways and in key traffic areas to best serve the patients in these areas, including Rittenhouse Square, the Reading Terminal Market and leading medical centers. Recently, Jushi signed a definitive agreement to acquire a Pennsylvania Dispensary Permittee approved for three retail locations in Reading, Pottsville and the Philadelphia region. Through the acquisition, Jushi will own and operate five dispensary permittees (allowing for up to 15 dispensaries in the Commonwealth), which is the current maximum allowable number of permits that can be operated by one company or its affiliates in Pennsylvania, outside of the Clinical Registrant program.
The company has also signed definitive agreements to acquire a majority strake in one of the only five companies holding permits issued by the Virginia Board of Pharmacy to cultivate and process medical cannabis, and to dispense and deliver CBD oil and THC-A oil extracts in Virginia. Elsewhere in Nevada, Jushi’s subsidiaries are seeking approval to obtain 100% equity ownership of Franklin Bioscience NV, LLC and have already completed the purchase of related real estate, owned by Farman LLC, which included the addition of two adjacent cultivation and manufacturing facilities.
Earlier this year, Jushi closed an acquisition of intellectual property from The Clinic Consulting Services(tm), The Bank(tm) and The Lab(tm) and hired its award-winning operations team. With the acquisition, the company acquired a series of trademarks, trade secrets and other proprietary intellectual information related to cannabis brands. The Bank(tm) owns IP pertaining to cultivation and genetics of over 150 different strains, while IP from The Lab(tm) pertains to proprietary concentrates and extraction techniques.
Jushi also signed definitive agreements to acquire a majority interest in an adult-use location in San Diego, California. Jushi’s partners in San Diego have successfully built a loyal customer base, which offers consumers a wide variety of high-quality products. This flagship store is easily accessible off the highway and delivers Jushi an entry point for future delivery into San Diego and neighboring cities. Jushi views this partnership as one of many sought by the company throughout California.
On the heels of the San Diego news, one of Jushi’s wholly-owned subsidiaries has been selected to move forward in the merit-based application process for a storefront retail (and ancillary delivery) permit in Culver City, California. Of the 23 retail storefront applications submitted, Jushi’s subsidiary was chosen as one of only three to receive this approval. The company intends to build a ground-up structure (approximately 500 feet away from an Interstate 405 exit) providing convenient access for retail and delivery. Culver City is surrounded by the City of Los Angeles, centrally located on the West side near Santa Monica, Beverly Hills and the Los Angeles International Airport. Culver City is particularly known for its growing high-tech and creative economies, and a dynamic downtown that is regionally known as a destination for restaurants, live theater and art galleries.
FURTHER PROMINENT MSO UPDATES
Curaleaf Holdings, Inc. (CSE: CURA)
Curaleaf has remained active as a multi-state cannabis juggernaut. Recently the company announced a deal to acquire GR Companies Inc., which increased their presence from 12 to 19 states. Curaleaf reports that it has the #1 market share in Oregon, California, Nevada, and Arizona, which account for over 80% of its revenue.
Harvest Health & Recreation Inc. (CSE: HARV)
Continuing its growth in California, Harvest Health recently acquired the Grover Beach dispensary 805 Beach Breaks. The acquisition of the dispensary marks the tenth location in California that Harvest holds the rights to. Prior to the Grover Beach announcement, Harvest Health announced its second location in North Dakota. The company also just increased its internal foreign private issuer threshold from 40% to 49.99%.
MedMen Enterprises Inc. (CSE: MMEN)
MedMen has continued to generate as high sales per square foot as many of its growing number of competitors. Built mostly upon a dispensary model, the California-based pot chain showed a 15% increase in sales between March and June. Coming off lawsuits directed at the company for possibly over-hyping its stock, the company seems to be focusing its messaging now mostly on its on-track sales numbers.
iAnthus Capital Holdings, Inc. (CSE: IAN)
With core businesses in Florida, New York and Massachusetts, iAnthus has established a presence across the United States through the ownership and operation of cultivation, processing and dispensary facilities. The company is in 11 states, and operates 23 dispensaries, with more than half spread across New Mexico, Florida, and Arizona. Earlier this year, iAnthus acquired MPX for more than $500 million, and moving forward expects to open new retail locations, like its recently announced opening in Miami, Florida.
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