A $3.4 billion deal goes to zero

HERO TO ZERO
Canopy’s Acreage deal is looking like a bust

Driving the news: In 2019, Canadian cannabis firm Canopy Growth announced it signed an agreement to acquire US cannabis company Acreage Holdings in a deal that valued Acreage at $3.4 billion.

The deal would close pending federal legalization in the US, or if the regulatory framework evolved enough for Canopy to keep its Nasdaq listing.

Here’s how I covered the deal for Business Insider at the time.

What happened: Acreage announced on Monday that Canopy’s US division, Canopy USA, would close the acquisition by mid-December. 

But instead of being a multibillion-dollar transaction, the deal could potentially value Acreage at 0 (!) dollars. In simple terms, those who hold Acreage’s fixed shares will get nothing if Canopy’s share price remains below $5 when the deal closes.

Canopy shares closed at $4.15 on Monday. Acreage shares dropped over 90% on the news — it’s now basically a penny stock. 

Why it matters: If the cannabis industry moves in dog years, then 2019 was half a lifetime ago. 

When the deal was announced, analysts, investors, and attorneys thought legalization in the US was right around the corner — and there would be millions to be made in fees for cross-border transactions. 

But that never came to fruition. Since then, both US and Canadian companies have seen their valuations fall into the gutter as investors have looked to put their money elsewhere. 

Acreage, which invested heavily in New York, has been particularly hard hurt by the industry’s struggles. You can tell the story of the cannabis industry’s boom-bust cycle just by looking at Acreage’s five-year chart. 

Let’s hope things start to turn around for everyone’s sake. 

-JB

The Drug Enforcement Administration said in a new filing that allegations it engaged in improper communications with Smart Approaches to Marijuana (SAM), an anti-cannabis group, ahead of the December 2 hearing on reclassifying cannabis to a Schedule III drug can be “categorized as gossip.”

Last week, attorney Shane Pennington alleged in a filing that SAM’s founder, Kevin Sabet, had improper ex parte contact with DEA officials based on a tweet Sabet sent. 

Read our November 21 newsletter for more background on the hearing, and read the filing here.

Minnesota puts cannabis license lottery on hold 🛑
A new legal cannabis market, and a new crop of lawsuits: A judge ordered a delay for Minnesota’s cannabis license lottery that was set for today, MinnPost reports. The delay is the result of four lawsuits filed against the state’s Office of Cannabis Management — all filed by parties who say they were wrongfully denied entry into the lottery. Earlier this month, Minnesota denied two-thirds of social equity applicants. Minnesota legalized cannabis last year, though licensed dispensaries are yet to open.  Tune in at noon to hear the latest on Cultivated Live.

New York set to be a $1 billion market 🌿
New York is set to become a $1 billion cannabis market by the end of the year, according to John Kagia, the state’s Office of Cannabis Management Policy Director. “There’s strong momentum behind the market right now,” he told The New York Post in an interview. The state has sold over $800 million worth of cannabis so far this year.

Advocacy group pushes Biden for action 🥊
The Drug Policy Alliance, an advocacy group, released a proposed Executive Order on cannabis reform for President Joe Biden to sign before he leaves office. The multi-part proposal underscores the goal of promoting cannabis reform as a tool to “advance equity and public health for all people,” and contains a number of proposals that would allow the White House to take action on cannabis reform without waiting for Congress. Read it here. 

Keeping track of rescheduling 👀
Attorney Matt Zorn has put together a landing page to track the DEA’s rescheduling hearings. He’ll also be posting all the filings. Make sure you bookmark this page as the hearing kicks off on December 2. 

Indiana wants legalization 👍
Seventy-percent of surveyed Indiana voters want legal cannabis, according to a new poll from Safe and Regulated Indiana, a Republican-backed cannabis reform group. Ohio and other states neighboring Indiana have legalized cannabis, so it’s likely voters want to keep that tax revenue at home. They may also want to ease their sorrows from the poor seasons the Colts and the Pacers are having. 

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Cannara Biotech reports a profitable quarter, with $23.4 million (CAD) of revenue — up 43%.

Ayr Wellness is launching a line of fruit-flavored vapes called Later Days. They’ll be available in Massachusetts, New Jersey, Ohio, and Nevada.

Where does cannabis tax revenue go? 💸
State cannabis tax revenue mostly goes to establishing general funds, supporting local law enforcement, and funding parks and recreation, according to a new survey from Ohio State’s Drug Policy Enforcement Center. Check out the full survey results here.

Maryland is by far the most profitable state per dispensary, according to data from cannabis marketplace LeafLink’s Q3 data report. Read the full report.

Sandwich chain Jimmy John’s leans into stoner friendly marketing:

jimmyjohns

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Why did California ‘kill’ its booming hemp-derived THC industry? | The Los Angeles Times

What’s behind the remarkable drop in US overdose deaths | The New York Times

California dispensaries get tax payment change notices as industry tax bill balloons | Green Market Report

Marijuana industry could stay in limbo under Trump | Wall Street Journal

Munchies makes its mark | Rockaway Wave

DRUID licensee, Johns Hopkins Cannabis Research Lab, launches mega-study to address urgent public health need | Impairment Sciences