It’s really beginning to feel like weed is legal here in the United States, and you would make some of the biggest players in the North American marijuana industry laugh to suggest it never will be. Bruce Linton, one of the CEO’s of Canopy Growth Corporation (NYSE: CGC), is the face of the Canadian based company and he is all-in on weed. Kevin Murphy, the founder and CEO of the U.S. based Acreage Holdings (OTC: ACRGF), is a savvy businessman that understands U.S. politics well. Together, Canopy and Acreage would be one of the most influential and dominating forces in the global cannabis market for a long time to come.
Canopy Growth Corporation has come to terms with Acreage Holdings to acquire them for an as of yet unknown amount, but somewhere in the range of a couple billion dollars. Reports are that Canopy has specifically purchased warrants that would complete the deal if cannabis is ever legalized nationally here in the U.S. Due to Canopy’s TSX listing, what would be the equivalent of the U.S. S&P 500 just up in Canada, and their NYSE listing, if they were to actually buy Acreage now they would forfeit both listings due to the Schedule I status of cannabis here in the U.S. They don’t want to do that.
Getting to Know Cannabis CEO’s
If you were to ask either CEO if they thought they were taking a big risk, I think they would both smile and give you a well informed list of reasons why they think it is highly unlikely the U.S. won’t be legalizing pot. I’ve met and interviewed both Bruce Linton and Kevin Murphy, and both men look like the cat that ate the canary. At the CanEx convention in Jamaica last September, Bruce Linton joked with me about how hard it is to believe that we were both getting paid to talk about weed in Jamaica. Kevin Murphy at the CWCB Expo in New York City had a much more serious tone talking about how cannabis is a states issue but medical access for our military veterans made it a federal issue.
As of the close of business on Wednesday, Acreage Holdings had a market cap of $2.45 billion and Canopy Growth Corp. had a market cap of $14.7 billion. However, if you look at the chart below you can see that things have begun to slow down already in Canada as Canopy’s share price entered into a sideways range starting near the beginning of the year. Canada became the first major economy to nationally legalize marijuana in October last year and the enthusiasm may have already begun to die down. If you speak with any Canadian executive of a major cannabis company, whether its Bruce Linton or Marc Lakmaaker of Aurora or Khurram Malik of Biome Grow (OTC: BIOIF) they will all talk to you about how essential the international market is to their business since there is only a population of about 37 million people in Canada relative to over 300 million in the U.S. and over 700 million in all of Europe.
Acreage Holdings’ U.S. Footprint
After Harvest Health bought Verano Holdings for $850 million in March, Harvest Health became the largest cannabis company in the U.S. Yet despite the Harvest Health acquisition they still do not have as many licenses in as many states to grow and dispense marijuana as Acreage Holdings, which possesses licenses in 17 different states. Kevin Murphy is not likely to stop there either. While Canopy patiently waits for the U.S. to figure out what it is going to do with marijuana, there is nothing stopping Acreage from continuing to acquire more licenses in more states. Creating an even bigger footprint here in the U.S. is something Canopy Growth is likely depending on Acreage Holdings to follow-through with. Canopy’ European and U.S. presence would then connect all the dots for its intention to remain the largest cannabis company in the world.
The Politics of Cannabis
Acreage Holdings is also very smart politically here in the U.S. Although, Bill Weld, the former governor of Massachusetts who I also interviewed in New York, recently declared that he would be running against President Trump in the 2020 election on the GOP card. Bill Weld sits on the advisory board of Acreage Holdings along with the former speaker of the house, John Boehner. Acreage has helped fund efforts to get the STATES Act passed, which would keep cannabis a states issue and not legalize cannabis nationally. It may be enough to allow Canopy’s purchase of Acreage to be legal in the eyes of the TSX. Weld running against Trump in the 2020 election is probably not making the President very happy.
President Trump said last year that he would probably support the STATES Act, but there has been speculation that he may be pulling back on his support. The current far right theory is that if the STATES Act becomes law it may pull many democrats to the ballot box in 2020 as marijuana reform ballot initiatives would likely increase with the passage of the bill. More democrats voting could endanger Trump’s reelection bid. In fear of Trump vetoing the STATES Act if it passes in Congress, Acreage may be having Weld run against Trump just as a tactic to pull much of Trump’s support away from him and bring more awareness to the movement to legalize marijuana nationally. Nearly ever democrat running for president supports legalizing marijuana nationally. Whatever Acreage’s political bias may be, legalizing marijuana nationally seems to be their top priority.
