Cannabis News of Note for the Week:

Politico Pro Cannabis: Big losses, tight capital markets could prove fatal for some weed businesses (paywalled, full text below)

Politico Pro Cannabis: Weed Industry Woes Choke Financial Activity (paywalled newsletter, full text below)

MJ Biz Daily: Justice Department could help marijuana industry via Cole Memo 2.0 – or hurt reform

Marijuana Moment: Congressman Blasts Federal Government’s ‘Hopelessly Out Of Step’ Marijuana Policy In Comments To Top Health Official

Green Market Report: Judge Narrows New York Retail Licensing Injunction to One Region

MJ Biz Daily: Marijuana tech firm Leafly pivots from news journalism to consumer content


Cannabis Reports of Note for the Week:

PBC Conference Releases Industry Landscape


Politico Pro Cannabis: Big losses, tight capital markets could prove fatal for some weed businesses
BY PAUL DEMKO | 03/30/2023 03:58 PM EDT

The weed industry’s financial woes may have bottomed out, but some companies likely won’t survive the ensuing bloodletting.

For well over a year, companies have been struggling with a glut of weed and collapsing prices in many state markets.

That’s been compounded by stingier consumers who are no longer flush with pandemic stimulus checks and have been battered by sky-high inflation.

And the lack of any federal policy changes has further soured investors on the quasi-legal industry, particularly the repeated failure of cannabis banking legislation.

The 13 largest U.S. cannabis companies that had released fourth quarter results for 2022 as of Thursday reported cumulative losses of just over $1.2 billion, according to a POLITICO analysis of financial reports.

That compares to just over $500 million in losses for those same 13 companies during the third quarter of 2022.

The market struggles have led many companies to ratchet back operations, particularly on the cultivation side, in an effort to stabilize markets. The hope is that these moves will create a better balance between supply and demand and gradually lead to higher prices.

“It’s all about rationalization and survival, quite honestly,” said Jonathan DeCourcey, an industry analyst with BTIG. “They are acknowledging that they’re not skilled enough to do everything … and they don’t have to be everywhere.”

Last month, for example, Ayr Wellness announced that it was selling off its cultivation and retail operations in Arizona. That followed Curaleaf’s announcement in January that it was shuttering most of its operations in California, Colorado and Oregon.

“We believe these states will represent opportunities in the future, but the current price compression caused by a lack of meaningful enforcement of the illicit market prevent us from generating an acceptable return on our investments,” Curaleaf CEO Matt Darin said in a statement at the time.

The sector-wide retrenchment is reflected in the lack of capital raises by cannabis companies so far this year. In the first 12 weeks of 2023, they raised just under $550 million — less than half as much as at this point last year, according to Viridian Capital Advisors, which tracks the sector.

Looking back to 2021 — when cannabis companies were giddy with the misguided belief that total Democratic control in Washington would lead to major policy changes at the federal level — they generated more than $4.5 billion in the first three months of the year.

“Certainly [capital] markets are challenged right now with cannabis, with a number of the cannabis investors running for the sidelines after SAFE Banking didn’t pass in December,” said Justin Dye, CEO of Schwazze, which has operations in New Mexico and Colorado, on a call Thursday with investors.

DeCourcey pointed out that the big publicly traded companies still have access to capital and aren’t at risk of running out of money. But for smaller operators the cash crunch and continued losses could prove fatal — and those challenges are almost certain to be exacerbated in the coming months by the expected tightening of credit markets following the failure of Silicon Valley Bank.

Many cannabis industry observers were anticipating that financial headwinds would lead to distressed companies getting scooped up by their bigger counterparts.

But so far that’s failed to materialize.

In the first twelve weeks of this year, just 32 deals closed with a valuation of roughly $740 million, according to Viridian. At this point in 2022, 59 deals worth more than $2 billion had been completed.

DeCourcey was among the analysts predicting a big wave of deals in 2023. But instead, he now believes companies are waiting to see which of their competitors will simply cease to exist in the coming months.

“You’re gonna see more and more small private companies actually fail and/or just close up the business,” DeCourcey said. “Operators realize that some of their smaller private peers are going to fail and will fall off on their own and that they can essentially win by that failure.”



There’s no indication that the financial malaise that’s been battering the U.S. cannabis industry for months will fade anytime soon. The lack of any progress on federal policy changes and plummeting cannabis prices in many state markets continue to throttle stock prices and stifle capital activity.

Through the first 11 weeks of this year, cannabis companies raised just $545 million, according to Viridian Capital Advisors. That’s down from $1.2 billion at the same point in 2022. Looking back two years, the dropoff is even more dramatic: Companies had raised roughly $4.5 billion through mid-March 2021.

In other words, weed businesses have generated just 12 percent as much capital as they had at this point in 2021.  

The AdvisorShares Pure US Cannabis ETF — which includes many of the country’s largest cannabis companies — closed on Friday at $5.82 per share, down 15.3 percent since the start of the year. The stock price has plunged from a high of $53.45 in mid-February 2021.

That means it’s shed nearly 90 percent of its value in a little over two years.

Many close cannabis market watchers have been anticipating that the sector’s economic doldrums will trigger a wave of mergers and acquisitions. The thinking is that financially distressed companies will be desperately searching for a way out and competitors with healthy balance sheets will exploit the opportunity to go on a shopping spree.

But so far that hasn’t materialized. Just 29 deals closed during the first 11 weeks of this year with a value of $741.8 million, according to Viridian. At this point last year, 56 deals worth just over $2 billion had been completed.

In fact, the total value of M&A activity so far this year in the cannabis sector is less than half as much as it was at this point in any of the last four years. 

Up this week: Columbia Care and Verano Holdings are among the major U.S. operators slated to release their full 2022 financial results.

CANNABIS MARKET POISED FOR CONTINUED GROWTH — The U.S. cannabis market was worth an estimated $30 billion in 2022, according to a new report from analytics firm New Frontier Data. Even if no new states legalize marijuana, the market is projected to reach $58 billion by 2030.

Adding more state markets: Assuming states continue to legalize marijuana at the same rate, the market is projected to reach $71 billion by 2030. New Frontier estimates that 18 new state markets could come online by then, including nine new medical and nine new adult-use markets.

Still, sales tend to fall in mature markets, with annual sales in the most mature markets — Colorado, Oregon and Washington — decreasing by about 14 percent from 2021 to 2022. Those markets also saw the steepest decline in cannabis prices — falling on average 30 percent.

The biggest potential adult-use markets are Florida, Pennsylvania and Ohio, while the biggest opportunities for comprehensive medical programs are in Texas, North Carolina and Georgia. If all of those states passed medical or recreational legalization, 94 percent of Americans would have some sort of legal access to regulated cannabis, and 66 percent would live in a state with legal adult use.