Now entering its second full year of legalization, the state of Nevada is showing signs of being the surging winner in the cannabis revolution. Unlike in other adult-recreational markets such as Colorado, Washington state, and Oregon, Nevada’s wholesale cannabis prices remain high, due to a more favourable supply-demand equation for growers and sellers.
Since the state went legal on July 1st last year, the adult-use market has been on a tear, with sales averaging $1 million a day—thanks to the more than 40 million tourists who visit Las Vegas alone each year.
Overall, the “Silver State” of Nevada has been consistently turning green, and has been drawing in a growing amount of cannabis investment. Companies are starting to seriously pay close attention to Nevada’s positive-trending cannabis sales, including Aurora Cannabis (TSX: ACB) (OTC: ACBFF), Golden Leaf Holdings Ltd. (OTC: GLDFF) (CSE: GLH), MedMen Enterprises (OTC: MMNFF) (CSE: MMEN), Terra Tech Corp. (OTC: TRTC), and most recently C21 Investments Inc. (CSE: CXXI) (OTC: CXXIF).
WHY NEVADA IS HOTTER THAN MOST MARKETS
Wholesale per-pound prices received by growers has seen a 30% increase from July 2017 to July 2018—whereas whole cannabis prices in other states have been declining for years.
The net benefit for the state has been overwhelmingly positive, as it continually breaks its own sales records. As of the end of June, Nevada had collected a total of $55.53 million in tax revenues from marijuana alone. Combining all sales for medical, recreational, and marijuana-related goods since legalization began, the total up to the end of June was $433.51 million.
While neighboring California has a much larger population, the profitability of Nevada cannabis operations are much higher. The two states are quite different from each other, based on their approach. Where California’s cannabis sector has run head-on into high taxes and excessive regulation, Nevada has simplified its market at the retail level.
California’s approach has translated to high legal prices and low sales volume, leaving plenty of sales on the table, or on the black market. California Cannabis Manufacturers Association estimates the black market outnumbers the legal market by a figure of five to one.
Nevada just isn’t having those same problems. Contrary to trends in other recreational markets across the United States, for instance, the fair market wholesale per-pound price received for marijuana growers has jumped more than $650 from July 2017 to July 2018, for an increase of 30%.
NEVADA CANNABIS DEVELOPMENTS
Aurora Cannabis (TSX: ACB) (OTC: ACBFF)
While not one of the company’s larger deals, Aurora Cannabis made an entry into Nevada through an acquisition of CannaRoyalty’s exclusive license to Wagner Dima’s innovative cannabis pre-roll technology for $7 million. The privately-owned Wagner Dimas is based in Nevada, and gained the cannabis giant’s interest by mass producing cannabis rolls and cones. The Nevada company produced 5 million rolls and cones last year. The move indicated that Aurora will be moving to produce pre-rolled products soon, which aren’t currently offered among the company’s line that includes whole-flower cannabis, milled cannabis, cannabis oils, and vaporizers.
Golden Leaf Holdings Ltd. (OTC: GLDFF) (CSE: GLH)
Oregon-based Golden Leaf Holdings is working on expansion within the USA into multiple markets. Most recently the company made acquisitions in Nevada and California, believing it is in a position to take advantage of the presumption that the US is trailing Canada in cannabis market valuation. Earlier in July, Golden Leaf introduced new cannabis concentrate product lines in Nevada through its Greenpoint Nevada subsidiary. The products included its Golden Tinctures, Golden Private Stash distillate vape cartridges, and Golden CBD product lines.
MedMen Enterprises (OTC: MMNFF) (CSE: MMEN)
Not wanting to miss out on the showbiz flair of the city, MedMen opened its first branded cannabis retail store in Las Vegas. Launched with red-featured showgirls and an Elvis impersonator to entertain the crowds, MedMen made its Las Vegas store the company’s 14th store nationwide, near the Hard Rock Hotel, the Thomas and Mack Center and McCarran International Airport. The company is already constructing another location at the Las Vegas Airport itself. MedMen has received lots of positive support and comments from local politicians upon their arrival in Las Vegas, including from state senators and a city council member.
Terra Tech Corp. (OTC: TRTC)
Earlier in July, Terra Tech sold 100% of its assets of its cannabis dispensary located on Western Avenue in Las Vegas to Exhale Brands Nevada for a total consideration of $6.25 million. While the sale appears to have been a sign of departure, Terra Tech retains a significant, focused presence in the Nevada market. Terra Tech continues to operate its Blüm, Desert Inn Road and Blüm, Decatur Boulevard dispensaries, both of which are located in Las Vegas, as well as its Blüm Reno dispensary, in Northwest Nevada. The company also recently opened a new 30,000 sq ft cultivation facility in Sparks, Nevada, while also awaiting approval on a 15,000 sq ft extraction lab in Reno, Nevada, both of which Terra Tech owns 50%.
C21 Investments Inc. (CSE: CXXI) (OTC: CXXIF)
By acquiring Nevada’s first medical dispensary that opened in 2014, C21 Investments made a big splash in the state earlier in July. Based out of Sparks, Nevada, the previously privately-owned business, Silver State Relief, was a significant chess piece in C21’s strategy to make an early impact through established revenue channels. Already, Silver State is alleged to be one of Nevada’s top three revenue-producing dispensaries. The acquisition fits within C21’s strategy of acquiring dispensaries across the legal states of the USA, which now include Oregon and Nevada. Among Silver State’s assets are 155,000 sq ft of grow space, and multiple dispensaries either already opened or expected to open later this year.
THE APPEAL OF SILVER STATE REVENUES
When C21 Investments Inc. (CSE: CXXI) (OTC: CXXIF) acquired privately-owned Silver State Relief LLC and Silver State Cultivation LLC for $20 million, the company was setting itself up to make a major splash in Nevada. The acquisition was the first transaction in a larger plan by C21’s expansion into the US cannabis industry.
The Silver State acquisition immediately puts C21 into revenue generation mode, as the companies and their vertically-integrated assets already bring in annual revenues of $37.5 million CAD.
“Our entire C21 leadership is very excited to enter the Nevada market and looks forward to working with our new partners at Silver State,” said President and CEO of C21 Robert Cheney in the company’s coinciding news release. “This represents our first acquisition of an established and profitable, vertically integrated business with strong potential for significant expansion on all levels, and is aligned with C21’s long term growth objectives.”
In 2017, Silver State reported $17 million in revenue. During in the first six months of this year, the company has already hit $15 million in revenue. Much of this growth can be attributed to Nevada’s overall cannabis market acceptance and maturation. However, there’s still plenty of blue sky ahead as well.
C21 not only acquired Silver State’s 155,000 sq ft grow space and 8,000 sq ft dispensary in Sparks, Nevada, but there’s yet another dispensary in Fernley, Nevada expected to open later this year. With the addition of the Fernley location, Silver State’s revenues over the next 18 months are expected to double—further sweetening the acquisition for C21’s investors.
C21 is expanding its US footprint in other markets, including Oregon, however as part of the Silver State acquisition’s terms, the company also has committed to expanding Silver State’s footprint within Nevada.
The C21 strategy as laid out to Silver State General Manager Aron Swan, ahead of the transaction, is to become the largest publicly-traded cannabis company in the world, by purchasing dispensaries all across the USA. By sidling up to a group such as C21, the move facilitates Silver State to grow much faster within Nevada, and be a part of something much bigger.
"This is a tough business. Investment capital allows us to expand a little more quickly, rather than organically," said Swan to the Reno Gazette Journal.
C21 recently completed another financing that should allow the company to pursue more strategic acquisitions in the near term. Adding significant revenue-generating businesses such as Silver State will only serve to help the company accelerate its acquisition goals both within Nevada, and in other US markets.
To read more about C21, please visit: http://usanewsgroup.com/2018/07/17/the-one-sector-that-will-make-fang-investors-envious/
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