Toronto-based Captor Capital Corp. entered into a nonbinding term sheet with I-5 Holdings.
Captor is seeking to increase its investment in I-5 Holdings in order to maximize the growth potential of the two I-5 Holdings dispensaries located in the Los Angeles area operating under the MedMen brand.
The dispensaries, located in Santa Ana and West Hollywood, are two of seven currently licensed to sell recreational cannabis in the Greater Los Angeles Area. Recreational cannabis was legalized by the State of California on Jan. 1, but the city of Los Angeles has yet to grant permits for any dispensaries within its borders.
As a result, the MedMen dispensaries in West Hollywood and Santa Ana — which were previously licensed to sell medicinal marijuana — are the closest options to buy legal recreational cannabis for the approximately 4 million residents of Los Angeles.
“Since cannabis was legalized for recreational use on Jan. 1, we have had lineups of at least 150 people from open to close at our Santa Ana and West Hollywood locations,” said Adam Bierman, co-founder of MedMen. “We are seeing more awareness, more traffic and more purchases than we ever have before, with early indications being that revenues are up significantly over the same period last year.”
“The success being enjoyed by the MedMen dispensaries in California provide us with a template that is easily scalable,” said John MacPhail, CEO, I-5 Holdings. “With more states, as well as Canada, primed to follow California in legalizing recreational cannabis, the growth potential for I-5 Holdings is substantial, thanks to its relationship with an established and respected brand like MedMen.”
“Not only will MedMen’s Los Angeles dispensaries provide us with brand awareness and a loyal following, they represent a major source of ongoing cash flow,” said John Zorbas, president, Captor Capital. “As an investment, this will prove extremely valuable as Captor seeks out further acquisitions and continues to grow.”
In January, it was reported MedMen was preparing to go public in Canada. Continued legal restrictions and hurdles to list on major exchanges in the U.S. are prompting more American cannabis companies to eye Canadian exchanges, reported CNBC. Other U.S. firms going public in Canada include New York–based iAnthus Capital Holdings, Denver-based International Cannabrands and Texas-based Alternate Health.
“The Canadian public markets offer access to a lot of capital, with a lot of certainty and a lot of speed, and there is this appetite among global investors to invest in a U.S. play,” said Adam Bierman, MedMen CEO and co-founder at a cannabis conference hosted by Canaccord Genuity in Vancouver in January.
According to a report by New Frontier Data, the legal cannabis market was worth $6.6 billion in 2016 and is forecast to grow to $24.1 billion by 2025, registering a compound annual growth rate of 16 percent. By segment, the medical cannabis market was worth $4.7 billion in 2016 and is expected to grow to $13.3 billion by 2025. Recreational cannabis sales throughout the same period are expected to grow at a 21 percent CAGR, from $1.9 billion to $10.9 billion. The continuous validation of cannabis products for both medical and recreational use is a key factor contributing to the progress made in this industry.
Recently, iAnthus Capital Holdings acquired through merger and acquisition transactions substantially all of the assets of GrowHealthy Holdings, and certain related subsidiaries. The acquisition completes iAnthus’ full-scale entry into the expanding Florida medical cannabis market, which is projected by Arcview Market Research to grow into a $1 billion market by 2020 and which has seen a 300 percent increase in the number of registered patients over the past six months. iAnthus previously acquired approximately 6 percent of GrowHealthy in a preferred share purchase in October 2017.
GrowHealthy and its affiliate, McCrory’s Sunny Hill Nursery, comprise one of just 13 current Florida Medical Marijuana Treatment Centers licensed to provide medical cannabis under Florida’s medical marijuana law.
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