Canada is about to become the first G-7 nation to legalize both medical and recreational cannabis fully. Entrepreneurs are setting themselves up to become behemoths in the global marketplace.
C21 Investments (CSE:CXXI), a Vancouver, British Columbia-based firm, announced plans last week that is it purchasing the oldest medical marijuana dispensary in the state of Nevada to become the largest publicly traded cannabis company in the world.
The company is set to acquire Silver State Relief, which opened in 2014. It’s cultivation facilities, in a deal valued around $50 million and billed as "one of the largest investment transactions into the USA cannabis industry by any Canadian public company to date."
But why are Canadians so eager to invest in US-based companies? The short answer: Americans can't do it themselves.
Cannabis remains a Schedule I narcotic in the eyes of the Drug Enforcement Agency, making it extremely difficult for companies that produce or sell the plant to gain access to traditional loans – and the public markets for that matter. In Canada, there are already dozens of licensed producers trading on major stock exchanges, many of whom have foreign holdings. This is leaving many US-based cannabis entrepreneurs frustrated as they are left behind in the burgeoning global marketplace.
More than a dozen of the states that have legalized marijuana for medical and/or adult-use allow out-of-state investors or publicly traded companies to invest in their fledgling marijuana markets. Colorado still prohibits publicly traded companies from owning in-state cannabis companies, a decision that some argue is hurting businesses. Nevada has a rich history of being a welcoming place for investors, especially from Canada. When developing their cannabis regulations, it was no surprise they decided to encourage outsider funding to their industry.
"Our entire C21 leadership is very excited to enter the Nevada market and looks forward to working with our new partners at Silver State,” said Robert Cheney, President, and CEO of C21, in a press release. "This represents our first acquisition of an established and profitable, vertically integrated business with strong potential for significant expansion on all levels, and is aligned with C21's long-term growth objectives."
Silver State Relief, located in Sparks, brought in an estimated $17 million in revenue in 2017, and the company generated $15 million in the first six months of 2018. C21 plans to spend over $10 million on expanding operations throughout Nevada, including the option to acquire a dispensary property scheduled to open later this year in Fernley, Nevada.
"This is a tough business. Investment capital allows us to expand a little more quickly, rather than organically," said Silver State General Manager Aron Swan, in an interview with the Reno Gazette Journal.
C21 Investments also owns dispensaries in Oregon, with plans to snatch up facilities in New Mexico and California. The company recently closed a fundraising round netting over CAD$5.3 million in gross proceeds.
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