In case you haven't been paying attention, North America is "going green" at a rapid pace -- and I'm not talking about solar energy. The legal cannabis movement is quickly picking up steam, and legal weed sales are expected to soar in the years that lie ahead.
In the 2019 "State of the Legal Cannabis Markets" report from Arcview Market Research and BDS Analytics, which was released last week, the duo calls for global cannabis sales in licensed dispensaries to rise from $10.9 billion in 2018 to $40.6 billion by 2024. That's a cool compound annual growth rate of more than 24%, and it's certainly enough to get Wall Street and investors excited about marijuana stocks.
But at the center of this excitement is the United States, which projects to generate nearly three-quarters of the $40.6 billion to be collected in 2024. A combination of ongoing marijuana legalizations (both medical and recreational), organic growth within existing markets, and the rise of cannabidiol (CBD), the nonpsychoactive cannabinoid best known for its perceived medical benefits, are all reasons that the U.S. cannabis market is expected to thrive.
Ultimately, this means vertically integrated, multistate dispensary operators are at the center of the green rush in the United States. With that being said, the following five U.S. pot stocks may have a leg up on their competition by possessing the most retail store licenses.
Harvest Health & Recreation: 142 licenses
The kingpin of all multistate dispensary operators in the U.S. currently looks to be Harvest Health & Recreation (OTC:HRVSF), which has more than 230 facility licenses on a pro forma basis (i.e., if all of its pending acquisitions were to close). Of these facilities, 142 are for retail licenses spanning 17 states.
Harvest Health, whose stores operate under the "Harvest" name, made waves primarily in mid-March, when it announced an all-stock deal to acquire privately held Verano Holdings for about $850 million. For a brief period of time, it was the largest all-stock deal announced in the United States.
However, perhaps an even bigger win for Harvest Health was the announcement three weeks ago that it had signed an agreement with the Asian American Trade Associations Council (AATAC) to provide its Colors, CBx Essentials, and Harvest-branded CBD products in over 10,000 gas stations and convenience stores around the country. The AATAC is a huge trade association that has ties with independent and branded gas station operators -- Harvest also announced that this deal could reach up to 30,000 stores by the end of 2019.
Clearly, Harvest Health has some work to do with just over a dozen stores currently open, but the sheer number of retail licenses it holds is unsurpassed in the dispensary space.
Green Thumb Industries: 89 licenses
Although Green Thumb Industries (OTC:GTBIF) is projected to be a major player, you certainly don't hear much about the company, which operates its stores under the Rise or Essence name. Currently, Green Thumb has licenses to open up to 89 retail locations, with a presence in one dozen states and 23 open Rise-branded stores.
Perhaps the most interesting recent move is the now-completed acquisition of Integral Associates, which operated its stores under the Essence name. This buyout gave Green Thumb a position in the tourist-friendly Las Vegas market, with three high-traffic open locations and licenses for an additional five stores in the Las Vegas area. Despite its relatively small population, Nevada projects as one of 13 billion-dollar marijuana markets by 2024.
That speaks to the next point: Green Thumb has firmly planted itself in pretty much every one of these billion-dollar markets. With six owned brands and more than a dozen production facilities, GTI, as the company is also known, aims to dominate in Nevada, California, Colorado, New York, Florida, Illinois, and other major marijuana markets.
Acreage Holdings: 88 licenses
In a tight race for the No. 2 spot, Acreage Holdings (OTC:ACRGF) comes in third with 88 retail licenses, just one behind GTI. However, Acreage does lead all multistate dispensary operators on the basis of state presence. It has retail licenses and an aggregate of 1.2 million square feet of production facilities or processing sites in 20 U.S. states on a pro forma basis.
If the name sounds familiar, it's likely because the company -- and now its shareholders through a vote -- has agreed to be acquired on a contingent-rights basis by Canopy Growth (NYSE:CGC). The deal, valued at $3.4 billion when announced, involves Canopy handing over $300 million in cash up front to Acreage's shareholders, then completing the deal in Canopy's stock if (and here's the contingency) the U.S. federal government legalizes cannabis. Buying Acreage is viewed by Canopy as a quick way to establish the infrastructure needed to succeed in the U.S., if and when the federal government changes its tune on pot.
Acreage also stands out for having a number of well-known lawmakers on its board of advisors. Long-time cannabis opponent-turned-supporter John Boehner (former Republican Speaker of the House) and former Canadian Prime Minister Brian Mulroney are both advisors for the company.
MedMen Enterprises: 86 licenses
Slotting in fourth but easily within striking distance for the No. 2 spot is upscale cannabis chain MedMen Enterprises (OTC:MMNFF), which is on a mission to normalize the cannabis-buying experience. On a pro forma basis, MedMen has licenses for 86 stores in 12 states, with 37 stores currently open (again, on a pro forma basis).
The transformational deal for MedMen looks to be its pending acquisition of PharmaCann. Announced in October but expected to close in the second half of this year, the $682 million all-stock deal will net MedMen 11 currently operational stores, six new states (bringing it up to the aforementioned 12), and 24 total retail licenses (MedMen currently has 62). A couple of these licenses will prove especially important, such as Illinois, which will be launching recreational cannabis sales at the beginning of 2020.
Looking ahead, the Sunshine State is a big-time target for MedMen. Even though the company announced plans to open a 15th retail store in California last week -- the Golden State is the nation's largest pot market by aggregate sales -- MedMen has plans to open as many as 30 retail locations in Florida, where cannabis is currently legal for medical purposes.
Curaleaf Holdings: 70 licenses (at least)
Lastly, we have Curaleaf Holdings (OTC:CURLF), the current leader among U.S. dispensaries in open locations, with 45. Operating in a dozen states, Curaleaf also has 12 cultivation sites and 11 processing facilities. In case you haven't noticed, this seed-to-sale control is imperative in order to 1) control quality, 2) keep costs down, and 3) follow federal laws that don't allow for the interstate transport of marijuana.
The reason I've alluded to "70 licenses (at least)" above is the company's own recent investor presentation that calls for the number of open dispensaries to climb from 45 to 70 by year's end. Unlike the previous four U.S.-focused pot stocks, Curaleaf doesn't regularly divulge how many retail licenses it holds. That means its efforts to have 70 open dispensaries by year's end likely means it has at least 70 retail licenses in its back pocket.
One thing Curaleaf does have is a rapid path to top-line growth. Two months ago, we learned that Curaleaf would acquire Cura Partners, the company behind the Select brand, for about $950 million in an all-stock deal. According to a Curaleaf presentation, Select generated $117 million in sales in 2018. When added to Curaleaf's $88 million, the pro forma $205 million in 2018 sales between these two companies leaves all of their dispensary-operating peers eating dust!
In other words, aggregate licenses aren't everything when it comes to succeeding as a vertically integrated dispensary operator.