Some Cannabis Companies Are Prepping for a Possible Next Wave of Legislative Change

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

The euphoria that spearheaded the cannabis boom throughout 2017 and 2018 was extinguished almost as quickly as it erupted.

As more U.S. states and Canada legalized recreational and medical cannabis use, the stock prices of early cannabis contenders like Aurora Cannabis Inc. ACB and Tilray Inc. TLRY breached returns of 2,000% and 1,400% compared to their initial public offering (IPO) closes.

Smaller entrants were not immune to the cannabis craze. Livewire Ergogenics LVVV, for example, realized a gain of 300% at the height of the 2018 frenzy. As a company focused on acquiring and managing real estate properties in the California cannabis market, Livewire operates in the first state to legalize marijuana for medical use.

The company’s mission to produce high-quality, organically grown cannabis products and create the Estrella Weedery brand was put to the test when the pace of legislative change failed to meet the enthusiastic outpouring of investment into the industry. 

As legislation lagged, retail investors grew impatient, and the stock that saw those meteoric rises quickly balanced out. Canopy Growth Corp. CGC, a stock that reached a $59.25 per share valuation, now trades at $13.97 (as of 11.9.2021), roughly the same valuation it had in the last month of 2017. 

Forward Thinking?

Recreational cannabis is legal in 18 states and decriminalized in 13 others. Medical marijuana is legal in 36 states, but cannabis remains an illegal substance under federal law and is still recognized as a Schedule I drug.

Despite the legal obscurities around the cannabis space, proponents of the industry are confident that positive legislation will eventually assimilate into remaining U.S. states. 

According to an S&P Global Market Intelligence report, cannabis companies in the U.S. and Canada struck close to 700 of M&A deals between 2018 and the 3rd quarter of 2020. M&As are still in vogue in 2021. Companies such as Tilray Inc. and Aphria Inc. recently joined forces under the ticker TLRY and have acquired MedMen Enterprises MMNFF as a strategic entrant into the U.S. cannabis market.

A number of cannabis giants share the love for M&As as a strategy to cross the United States-Canadian border. Ontario-based Canopy Growth Corp. WEED, for example, has acquired Acreage Holdings in New York and Ebbu in Denver, 2 major players in U.S. cannabis cultivation.

Similarly, Pennsylvania-based Hydrofarm Holdings Group Inc. HYFM has recently acquired Greenstar Plant Products, a Canadian plant nutrients firm whose horticultural effects pair well with Hydrofarm’s cannabis cultivation infrastructure plan.

Time will tell if the federal law will switch in the cannabis world’s favor. Till then, companies like Livewire Ergogenics and its cohort of domestic cannabis contenders are fighting for a spot in the race with an innovative approach and creative business model in the cannabis market. The Company focuses on acquiring, managing, and licensing well-qualified cannabis real estate locations to establish fully compliant and permitted facilities to produce cannabis-based products and establish services for the state-wide distribution of these products in California.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.