This story was reprinted with permission from Crain Chicago and was written by John Pletz.
As the state issues dispensary licenses, the first agreements to sell them are surfacing.
Planet 13 says it will pay $2.9 million to purchase the 51% of a Chicago-area retail license it doesn’t already own, putting the total value of the license at roughly $6 million.
The Las Vegas-based company partnered with Frank Cowan, who qualified as a social-equity applicant and won an Illinois license a year ago when the state held lotteries for 185 new dispensaries. After several lawsuits were resolved, the state issued the licenses beginning July 22. Applicants have 180 days to find a store location. Planet 13 has yet to announce a location.
Planet 13 (OTC: PLNHF) says it has negotiated an option to purchase Cowan’s majority interest over the next two years for $866,250 in cash, as well as nearly 1.1 million shares of stock that are valued at roughly $2 million. Cowan says he plans to remain with Planet 13 after he sells.
The state of Illinois says dispensary licenses it issued are conditional and can’t be sold until they are finalized, which means a store has passed final inspection and is open for business. But that hasn’t stopped license holders from negotiating deals.
MariMed, a Massachusetts-based cannabis company with four Downstate retail shops, said today it has an agreement to buy another dispensary license in southeastern Illinois near the Indiana border. It declined to disclose the name of the license holder or the price. In May, the company bought a “craft-grow” license to cultivate marijuana in downstate Mount Vernon.
“I anticipate we’ll hear of a lot more license sales in the next 30 days,” says Bill Bogot, a partner in Chicago at law firm Fox Rothschild and co-chair of the firm’s cannabis group. “There are people who had partners all along, but I’m also seeing people who never intended to sell who are getting offers.”
Ever since Illinois legalized recreational marijuana three years ago and announced that it planned to award new licenses for retail shops, lawmakers and people connected to the weed industry have wondered how many winners would sell their licenses.
A key aspect of the Illinois law was its aim to diversify ownership of the largely white- and male-owned marijuana industry. Lawmakers created a provision to award extra points to “social-equity” applicants, or those who lived in neighborhoods disproportionately impacted by violence and poverty associated with the war on drugs or who had convictions for marijuana possession that no longer would be illegal.
Early on, industry experts speculated the new retail licenses would fetch as much as $8 million to $10 million. But the price of those licenses has been under pressure over the past year. Cannabis stocks have dropped by two-thirds as the overall market fell and hopes faded for loosening federal cannabis restrictions. Since Illinois legalized recreational weed, would-be investors also have been presented with additional options to invest, with new markets such as New Jersey, Arizona and New York. Meanwhile, the costs of opening a dispensary have risen.
“Interest rates are challenging,” Bogot says. “The federal government hasn’t moved on legislation (that would free banks and others to lend to cannabis companies). Sources of capital are highly constrained, and that presents challenges. People are getting offers and entertaining them.”