the termination of proposed dispensary acquisitions, the furlough of 122 employees and closed operations in California, Iowa, Maryland, Oregon and Washington.
Clearly, the major slow in investments is having a negative impact on big players in the cannabis space.
COVID-19 as an Excuse
What is the reason for this massive lull in cannabis investing? While many people will point to the coronavirus pandemic and recent civil unrest as reasons for reluctance, the industry’s financial challenges existed long before the simultaneous crises our country is witnessing.
Some of the industry's heavy-hitters, these massive, multistate operations, were “built to flip” instead of being "built to last.” When scaling, no legitimate focus was given to how many stores were really needed and which markets would actually be profitable. The focus appeared to be on making purchases and acquisitions aimed at expanding a company’s geographic footprint and brand to the largest possible extent and hoping more investor dollars would come in to sustain that growth.
Last year in Colorado, for example, a multitude of cannabis companies’ lives were on the line when it came to the successful passage of House Bill 19-1090. Enabling greater investment flexibility in marijuana businesses, the measure gave over-extended cannabis companies an essential lifeline. Despite the bill’s passage, the influx of shareholder investment dollars still hasn’t fully come to fruition.