Marijuana Market: Partly ‘Craft Beer,’ Mostly ‘Cable TV,’ CEOs Say

Written by: Bill Peters – 

The CEO of iAnthus Capital, the cannabis company that announced a $638 million dollar merger on Thursday, said he sees a U.S. market dominated by no more than 10 national players, who would control around 80% of the market. Meanwhile, marijuana stocks were mixed.

“I think it looks a lot like cable TV,” said iAnthus CEO Hadley Ford in an interview on Thursday, noting that the cable business began with scores of competitors that were whittled down to a handful over the past few decades.

The remarks came after iAnthus Capital said it agreed to buy MPX Bioceutical in an all-stock transaction. The post-merger company will apply to list on the Canadian Securities Exchange, which has become a hub for raising money in the cannabis industry.

Both iAnthus and MPX are technically based in Canada but do a lot of their business in the U.S. The deal would give the combined company access to 10 U.S. states where cannabis is legal in some form. “You can see the players,” Ford said. “It’s iAnthus, it’s GTI, it’s MedMen, it’s Acreage, it’s Curaleaf. Those are the guys. There aren’t going to be any more.”


Those companies already have notable backing or backstories. GTI, or Green Thumb Industries, is run by Ben Kovler. His great-grandfather was an early investor in the brand that would become Jim Beam.

Former House Speaker John Boehner and ex-Massachusetts Gov. Bill Weld are backing Acreage Holdings, which plans to go public in Canada via a reverse takeover deal. Curaleaf, which also wants to list in Canada, is helmed by venture capitalist Boris Jordan. Jordan helped lead Russia’s earliest attempts to privatize after the collapse of the Soviet Union.

Craft Weed

As for the remaining 20% of the U.S. market? Ford said it would likely be comprised of local producers serving customers who want local product.

As of now, many big cannabis companies are operating at a loss as they try to expand. That has raised questions about towering valuations. The market cap of Tilray (TLRY), some media outlets noted, briefly surpassed American Airlines’ (AAL) last month despite recording just $9.7 million in second-quarter revenue. IAnthus made $4.9 million in sales during the first half of the year. MPX, for its most recent fiscal first quarter, booked $14.5 million in revenue.

But as industry watchers worry that Canada will run out of weed during the dawn of that nation’s new fully-legal era, the big companies’ struggles could provide an opening for smaller, “craft” producers.

Vic Neufeld, CEO of Aphria, a Canadian cannabis producer, said this month that Canada’s customers would likely see “Sold-Out” signs in the opening weeks of recreational legalization, as pot producers wait for the government to approve equipment.

“Now that allows, however, these craft growers — these smaller LPs (local producers) who were not allowed to enter the journey because they could not satisfy the provincial needs — that allows them an opportunity to come to the table,” he said. “That’s a good thing for the Canadian consumer, and I can see that happening.”

Marijuana Stocks

Tilray fell 1.6% in the stock market today. Canopy Growth (CGC) was flat. Cronos Group (CRON) dipped 1.3%. Those marijuana stocks sold off on Wednesday, when recreational legalization officially began in Canada. The potential shortages would benefit the illicit market that licensed producers are trying to stamp out.

Marijuana Businesses Get More Funding

Meanwhile, Green Organic Dutchman, a Canadian marijuana producer, said Friday that it had closed a $58 million funding round. The fundraising occurred on a bought-deal basis, in which investors agree to buy a company’s entire offering. The deal, announced earlier, was underwritten by a group led by Canaccord Genuity.

This month iAnthus said it closed a similar round of financing, which was led by GMP Securities and also included Canaccord.