Here's a pot pop quiz for you. What's the biggest pure-play marijuana company in the world? You might answer Canopy Growth (NYSE:CGC). And you'd be right based on market cap. But Canopy Growth isn't the biggest pure-play company on a metric that's arguably much more important than market cap.

When it comes to recent quarterly revenue, Canopy Growth trails behind several U.S. cannabis operators. Until last week, Green Thumb Industries (OTC:GTBI.F) ranked No.1 based on revenue. Now, however, GTI has been dethroned. Meet the world's new biggest pure-play cannabis company based on revenue... Curaleaf Holdings (OTC:CURL.F).

Cannabis growing in a greenhouse

Image source: Getty Images.

A big acquisition

Curaleaf already came close to being the leader in revenue generation. The Massachusetts-based cannabis operator reported $96.5 million in total revenue in the first quarter of 2020. That amount trailed narrowly behind GTI's Q1 revenue of $102.6 million and slightly ahead of Trulieve's Q1 revenue of $96.1 million. 

But on July 23, 2020, Curaleaf closed its acquisition of GR Companies, better known as Grassroots. This deal brings the largest private U.S. vertically integrated multi-state cannabis operator under Curaleaf's wing. And it will significantly boost Curaleaf's revenue going forward.

Curaleaf first announced its plan to buy GrassRoots in July 2019. At that time, the company stated that its 2019 Q1 revenue would have been 16% higher on a pro forma basis had the acquisition already been finalized. That's enough of a bump for Curaleaf to leap ahead of GTI going forward.

With GrassRoots, Curaleaf now operates in 23 states. It has 88 dispensaries opened with licenses for another 47 dispensaries. The company also operates over 30 processing facilities plus 22 cultivation sites. All of this gives Curaleaf an addressable market of more than 192 million people who live in states where either medical or adult-use recreational cannabis is legal.

One of a string of deals

Curaleaf's Grassroots acquisition represents the latest in a string of deals for the company in recent months. Earlier in July, Curaleaf completed the acquisition of Colorado-based BluKudu, which makes premium cannabis edibles for the medical and adult-use markets in Colorado.

In April, Curaleaf bought three Arrow Alternative Care (AAC) dispensaries in Connecticut. Curaleaf was already one of four licensed growers in Connecticut. The AAC deal gives it vertical integration in the state.

Curaleaf completed an even more transformational acquisition of Select in February. The Select deal gave the company significant market shares in California, Nevada, Arizona, and Oregon.

There's another acquisition waiting in the wings. Curaleaf plans to finalize its purchase of Alternative Therapies Group (ATG) pending approvals from the Massachusetts Cannabis Control Commission. The company already receives management fees from ATG. 

Bigger and better things on the way?

Curaleaf lost more than half of its market cap during the stock market crash in February and March. Since then, though, the marijuana stock has been on a roll and is now up more than 20% year to date. But it's possible that the momentum of the past three or so months is just the beginning.

Despite generating more revenue than Canopy Growth, Curaleaf's market cap is still around $2 billion less than the Canadian cannabis producer. The most likely reason behind this lower valuation is that cannabis remains illegal at the federal level in the U.S. That prevents Curaleaf from listing its shares on a major U.S. stock exchange. Canopy doesn't operate in the U.S. cannabis market, so it doesn't have that problem.

However, the political winds appear to be shifting in the United States. The chances of federal changes that would recognize state laws that legalize pot appear to be higher than ever before. Depending on how the November elections go, Curaleaf could have even bigger and better things on the way.