The public market for cannabis is off by more than 40 percent, despite the industry’s blazing forecast and enthusiastic quarterly reports, The Wall Street Journal (WSJ) reported on Saturday (Oct. 12).
The WSJ pointed to a near-$700 million merger of two U.S. companies that was scrapped. Any predictions about what will happen next year have been pulled, a Canadian producer told the paper.
“The capital markets have dried up,” Brian Athaide, chief executive of Toronto marijuana grower Green Organic Dutchman Holdings, told the WSJ. He said the firm is holding off on seeking financing for two facilities — one planned at 1.3 million square feet.
Los Angeles-based MedMen Enterprises — a publicly traded cannabis company with operations in Arizona, Illinois, California, Nevada, New York and Florida — said it was scrapping a proposed all-stock takeover of Chicago-based PharmaCann. Both companies operate dispensaries in several U.S. states.
MedMen said that “difficult market conditions” were among the many reasons it opted out.
“The underperformance has made it increasingly more critical to allocate capital efficiently, given the current industry headwinds,” MedMen said in a news release, according to the WSJ.
The first-ever U.S. bank-led cannabis equity offering — CannTrust Holdings — fell as much as 14 percent in New York in May, marking the sixth day of declines at the time, and the lowest level since January. The decline came after the Ontario-based company announced that it would price its equity offering at $5.50 a share, 23 percent below its closing price before the offering was announced, and 54 percent below its high on Oct. 16. As a result, CannTrust’s market value fell below $600 million.
As many states move toward legal marijuana use (either medicinally or otherwise), the U.S. government is looking to clarify issues regarding payment. Despite 47 states having some form of legalized marijuana for sale, the legal cannabis industry is in a state of potentially dangerous uncertainty when it comes to financial services.
The U.S. is not the only place where legal cannabis faces a problem of moving away from cash, and into the full world of digital payments. A similar situation exists in Canada, where the market could reach as much as $5.1 billion in annual sales by 2020.