Canopy Growth, along with a slew of other Canada-based companies, has had its eyes on potentially participating in the U.S. cannabis market. In 2019, Canopy announced an approach to engage in the American cannabis market, entering an arrangement with Acreage Holdings, that would allow it to buy the company when permissible. Since then, Canopy also made a non-equity investment into TerraAscend, a Canadian and U.S. cannabis company, giving it the ability to own 20% of the company. Canopy made loans to each of the companies, as well, although the funds were restricted from use in their state-regulated THC businesses.
While Canopy’s strategy for its structure isn’t working out exactly as planned, there have been other similar moves in the industry. Recently, Toronto-based Cronos Group purchased an option to amass a 10.5% stake in a private American management services organization (MSO) called PharmaCann for $110.4 million. Likewise, Canadian retailer Fire & Flower is licensing its brands and investment portfolio (IP) to a third-party that will operate stores in the U.S. in exchange for the right to purchase the entity in the future. U.S. cannabis company Charlotte’s Web bought an option to acquire the THC business of Stanley Brothers, as well.
New Cannabis Ventures expects to see an acceleration in deals that tie up American cannabis companies. On its fourth-quarter earnings call, Canadian pharmaceutical and cannabis company Tilray’s CEO spoke on the company’s plan to enter the U.S. THC market and generate $1.5 billion in annual revenue from it by 2024. While Tilray will be actively working to collect business purchasing options, Canopy Growth alluded that it isn’t done in the U.S. during its own quarterly call. On its third-quarter conference call, prospective cannabis industry company Miracle-Gro’s CEO, Jim Hagedorn, strongly suggested that it will be looking to position itself for eventual legalization. Hagedorn stated, “After months of work by an internal task force, we’ve created a process that will allow us to make non-equity investments in other entities that invest in cannabis brands and operations. In fact, we’ve been in discussion with potential partners to bring this strategy to life and hope to see significant movement in the near future.”
He concludes, “Our evolving vision is to create the optionality to have an early mover advantage in the broader U.S. cannabis market when federal law allows.” This sudden interest in doing business in the U.S. expressed by Tilray, Canopy Growth, and Scotts Miracle-Gro could help increase retail attraction in the management services organizations if any announce deals.