Cannabis and Hemp Sector Ideas

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>>> U.S. Pot Industry Faces Antitrust Overhang: Cannabis Weekly


Bloomberg

By Kristine Owram

September 8, 2019


https://www.bloomberg.com/news/articles/2019-09-08/u-s-pot-industry-faces-antitrust-overhang-cannabis-weekly?srnd=premium


Department of Justice reviews takeovers in fragmented industry


‘I think it will be a grinding process,’ iAnthus CEO says

California Pot Users Turn Out In Droves To Ring In Legal Sales


In this article

IAN
IANTHUS CAPITAL
3.38 CAD

LABS INC
Private Company

ENTERPRISES INC
Private Company

RECREATION INC
Private Company

CRESCO LABS
Private Company


The U.S. cannabis industry is highly fragmented, yet at least six acquisitions are languishing in the purgatory of Department of Justice antitrust reviews.

It’s ironic, as there’s certainly no risk of a cannabis cartel forming anytime soon. It’s also one of the primary reasons that many publicly traded U.S. cannabis companies have fallen 40% to 50% from their 2019 highs.

The industry consensus is that the reviews are the result of a government that’s trying to get up to speed on a new industry, rather than genuine concern about a pot monopoly, meaning the stock sell-off may be overdone.

“If you came in with a plastics deal they’ve probably got bios and databases on every plastics company in the history of mankind; you come in with cannabis and they would have no idea how big a company is or what they do,” said Hadley Ford, chief executive officer of iAnthus Capital Holdings Inc., whose recent acquisition of MPX Bioceutical escaped review and closed in February.

Here’s a list of the takeovers that are currently facing a holdup at the Department of Justice, according to Canaccord Genuity analyst Matt Bottomley:


ACQUIRER TARGET

Cresco Labs Inc. Origin House

MedMen Enterprises Inc. PharmaCann

Harvest Health & Recreation Inc. Verano Holdings

Curaleaf Holdings Inc. Select

Curaleaf Holdings Inc. Grassroots

Green Growth Brands Inc. Moxie


Bottomley believes the reviews are keeping some investors on the sidelines, since many of these companies are relying on the pending deals for aggressive pro-forma revenue growth.

However, “we believe the risk of the DOJ taking a hard stance against sector M&A on antitrust considerations is low given the nascent and disaggregated nature of the sector brought on by continued prohibition at the federal level,” Bottomley wrote in a note last week.

He expects the Department of Justice to begin approving deals as soon as next month, with Cresco’s proposed acquisition of Origin House the first to go. “As a result, we believe the closing of sector M&A could be the most near-term and material positive valuation catalyst in the sector for investors to get ahead of,” he said.

U.S. pot stocks are off 40-50% from 2019 highs

Curaleaf is the subject of two separate antitrust reviews for its $949 million acquisition of the Select brand and its $875 million takeover of closely held multi-state operator GR Companies Inc., known as Grassroots.

The cannabis deals that were announced late in 2018 and in the first quarter of this year should begin to receive approval in the fourth quarter, Curaleaf Chairman Boris Jordan told Bloomberg TV recently. However, that wouldn’t include his own company’s acquisitions, which were announced in May and July.

Over at iAnthus, Ford is less optimistic that the Department of Justice will act quickly.

“I can’t imagine any of them get denied ultimately but I think it will be a grinding process while the DOJ gets up the curve at everyone’s expense,” he said.

Upcoming Events This Week

WEDNESDAY 9/11

Aurora Cannabis Inc. reports its fiscal fourth-quarter results after markets close

CannaRoyalty to hold its annual general meeting

Cientific Group holds the International Conference on Cannabis and Medicinal Research in Osaka, Japan through Sept. 12

THURSDAY 9/12

The Grow Up Conference & Expo runs in Niagara Falls, Ontario, through Sept. 14

Arcview Group and Muisca Capital Group host the Cannabiz Latino Hub Impact Investment Summit in Bogota

The Females to the Front retreat, for “female founders and funders in the cannabis space,” is held in Palm Springs, California, through Sept. 15

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