It’s been a hot start to the year for the leading U.S. cannabis companies, and now many top players are preparing to double down.
Following the wins in Georgia’s Senate runoff elections, Democrats are soon to reap Senate control, and thus, a slim margin to push through long-sought cannabis reforms. As those hopes pushed shares in the top U.S. multi-state operators higher by more than 10%, executives steering the companies have been even quicker to double down on growth opportunities.
Curaleaf (CURLF), the nation’s largest multi-state operator, was quick to pull the trigger on shoring up more than $200 million in funding through both a share offering and new $50 million revolving credit facility that will serve to increase strategic flexibility, according to Executive Chairman Boris Jordan.
“The minute we saw an unexpected turn of events in Georgia, we decided it’s likely that regulations will move much quicker,” he told Yahoo Finance Live. “It really was there in order to prepare the company for what we think will be an acceleration of growth.”
Key to that growth will be the speed in which states that voted to legalize cannabis set up policy frameworks, and at a federal level, which policy proposals receive the largest attention from legislators. As Cowen Managing Director Vivien Azer told Yahoo Finance last week, potential reforms range from mild banking reforms through the SAFE Banking Act, which would allow the industry to tap traditional financing and banking, to more progressive agenda goals like federal decriminalization and criminal expungements through the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. A combination deal could also be pushed through, but Azer’s base case at least includes a reduction of burdensome federal taxes that could potentially lighten tax burdens for top companies by more than 30%.
With New Jersey legalizing through a ballot initiative this November and New York increasingly looking likely to follow with legalization, according to New York Gov. Andrew Cuomo’s State of the State address, Boris says Curaleaf could tap newly raised funds to either build up Northeast efforts, or chase new form factors like drinks or edibles to attract new cannabis users.
“We think that the formulated products market is the future of the cannabis market,” he said. “Obviously there will always be those that want to smoke, but it’s very difficult, to first, brand smokable products and two, let’s be honest, any smokable product has still got some issues around it in terms of health.”
Of course, it’a not just Curaleaf chasing those opportunities. Chicago-based competitor Green Thumb Industries (GTBIF) told Bloomberg it’s considering unlocking an additional $100 million through refinancing debt ahead of any policy changes. Last week, the CEO of Canadian cannabis giant Canopy Growth (CGC) said he accelerated his timeline for federal reforms, which could trigger its pending acquisition of multi-state operator Acreage and thus, Canopy’s entrance into the U.S. market.
“We feel pretty bullish that some variant of the MORE Act, maybe with some changes versus the one that made its way through the House in December, will get passed this year,” Klein said. The MORE Act passed overwhelmingly in the U.S. House of Representatives, but was not taken up in the Senate by outgoing Senate Majority Leader Mitch McConnell.
Other Canadian competitors have also gotten creative in the interim as reforms are awaited. Last year, Aphria (APHA), which recently announced a merger with its Canadian peer Tilray (TLRY), paid $300 million to acquire Atlanta craft beer maker SweetWater Brewing. The move could shrink the lead in the beverage space held by Canopy, which plans to begin selling cannabis beverages through its Acreage partnership in the U.S. this summer.
As a Massachusetts-based company with the largest footprint in the U.S., Curaleaf is poised to continue rolling out new products at the most national scale currently achievable, according to Jordan, who also declined to comment on how growth prospects might boost the company’s share price.
“We’re in the second or third inning in a very long game,” he said. “I firmly believe the stock price will reflect the business that we build and that’s really what I’m focusing on.”
Zack Guzman is an anchor for Yahoo Finance Live as well as a senior writer covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.
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