Stigmas are fading, and a critical mass of states have adopted legal marijuana, either for medical or recreational use.
Ayr Wellness has closed four major acquisitions in new sates since December, and it’s set to close the acquisition of New Jersey cannabis operator GSD New Jersey in July.
Of particular note is the company’s acquisition of Liberty Health in Florida, which Ayr purchased for only $290 million and closed at the end of February.
Why so much optimism for the Florida asset? It’s because Ayr bought Liberty as it was having cultivation problems in Florida’s humid climate, with 25% yield losses.
That’s likely due to the market’s failure to understand the step-change in revenue and profits the company should see this year.
Another company branching out to new states, including Florida, Massachusetts, and Ohio, is Cresco Labs.
That is, instead of selling its brands only in its own stores, it aims to get its brands in front of as many people as possible as quickly as possible as the industry develops, perhaps at the sacrifice of near-term margins.
Although Cresco Labs’ adjusted EBITDA margin came in at just 20% last quarter — still good, but below some of its peers — margins should rise in the second half of 2021 as the company scales new assets.
Cresco appears to be attacking the industry in the right way, with aggressive wholesale distribution and a concentration of highly productive retail stores.
Finally, Jushi Holdings is a smaller name in the space, about a $1.4 billion market cap, when factoring in all of its yet-to-be-converted warrants.
Virginia just legalized adult-use cannabis, and Jushi is just ramping up its first stores in suburban Washington, D.C., one of five state “zones” where a company is granted an exclusive license.
Revenue is accelerating for Jushi, up 29% sequentially, with last quarter already exceeding half of 2020’s full-year revenue.
Insiders have contributed $47 million of their own capital to Jushi, so one would expect the team to prudently manage its capital allocation to high-return opportunities as things develop.