Well, that didn't take long: Less than a week after Colorado Governor Jared Polis signed a bill that expanded marijuana business investment opportunities for publicly traded companies, venture capitalists and private equity firms, one of the state's largest pot corporations announced plans to scoop up two commercial marijuana operations, including the largest legal outdoor cultivation in North America.
On June 5, Medicine Man Technologies announced that it had reached binding agreements with Los Sueños Farms, an outdoor marijuana farm on 36 acres outside Pueblo, as well as Mesa Organics Ltd, which owns a commercial cultivation, dispensary and extraction facility in Pueblo. The price of the acquired companies will be 125 percent of their respective gross revenues in 2019, according to Medicine Man Technologies CEO Andy Williams, who says that operations should remain the same outside of a few administrative changes.
The sales can't take place until the language of House Bill 1090 goes into effect, however, because Medicine Man Technologies is a publicly held company. After the new law takes hold on November 1, Medicine Man Technologies plans to finish purchasing both companies by February 1, 2020, Williams says.
And that might not be the end of the buying spree: Medicine Man Technologies' most recent quarterly report with the Securities and Exchange Commission notes that the company has binding term sheets executed "with three entities." Williams is mum on future acquisition plans, but confirms that Medicine Man Technologies is looking to purchase more companies.
"The new law repealed the prohibition against public companies from owning cannabis licenses in the state. It also made provisions to allow out-of-state ownership of cannabis licenses without the restrictive provisions that were in place before," he explains. "Now, outside investment can come from a public company or private money, like investment funds, banks or private equity capital."
As initially written, Colorado regulations regarding marijuana companies were designed to discourage criminal investment in the pot industry, which is still federally illegal and largely a cash-only trade. But as more states (and Canada) legalize recreational marijuana and ease investment opportunities, Colorado's larger pot companies began to get frustrated with this state's relatively strict rules.
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The new rules allowing public investors and more funding revenues weren't supported by all of the industry, though; owners of smaller marijuana businesses were concerned about increased consolidation within the state. But even so, those walls are about to go down, and Williams expects similar moves from other marijuana companies with deep pockets.
"Not everybody is going to do this, but I do know other companies that I have a lot of respect for that will be going down similar paths," he says. "That is going to be great for Colorado, ending up with two or three headquarters of the country's largest cannabis companies."
One of the first marijuana companies to file with the SEC, Medicine Man Technologies is already a big conglomerate, reporting ownership in a cannabis nutrient brand (Success Nutrients), a hydroponic store and wholesale supplier (the Big Tomato), a marijuana consulting business (Denver Consulting Group) and a publishing outlet for books and phone apps (Three a Light), as well as a pending agreement to purchase cannabis pharmaceutical research firm (MedPharm Holdings) once HB 1090 goes into effect. Williams also owns Medicine Man dispensaries in Colorado.
Update: This story was updated to reflect that Medicine Man Technologies and Medicine Man dispensaries are two different companies.