I too expect some M&A in 2023, but really only from the competitive markets...and (as they mentioned) for cheap as some of the smaller companies finally throw in the towel because there is little to no margin between cost to produce versus cost to sell. I personally think that the current political landscape, and the negative sentiment surrounding the industry, has been intentionally orchestrated so that the larger companies, that have access to capital and capital markets, can continue to struggle to get by...but at a significant less struggle than private or mom&pop companies...as a way to convert the existing industry into an oligopoly.
As more and more cultivators go out of business, in the competitive markets, the price of flower should restore since there is less glut...and those competitive markets will hit some new normalization (just a guess - around the $1200-$1500/pound).
With that being said --
Viridian Capital Advisors: “We expect the capital market slowdown … to result in an upswing in M&A activity. MSOs will find buying distressed companies to be a more cost-efficient method of expanding capacity or entering new markets.”
"MSOs"...used pretty generically in this article...as if the "MSO" title automatically gives an operator a leg-up...and should be created equal.
I think I would sub "MSO" for 'public company'.
None the less, I dont see most of the MSOs interested in getting back in the competitive markets in 2023. Why would they? They spent most of 2022 running from them...and will probably continue to until wholesale pricing is favorable (to them) once again. I fully expect 'top-MSOs' to continue to focus on newer markets because they have the resources...and because those new markets command a higher ROI.
Side Note: I actually expect a lot of the MSOs to use the current climate of the market to write off poor decisions, in the form of goodwill, on their Q4 earnings (like Terrascend did in Q3...essentially doubling their accumulated deficit). I think investors, also feeling the depressed market, will just accept goodwill as a market condition. They won't see it as a red flag. Also, in doing so, it will allow these MSOs to report better earnings(at least in appearance) in future reports.
...and the parallels of the US MSO to Canadian LP continue...while investors keep their blinders on.
