The ink was barely dry on House Bill 1090, which allows out-of-state investors and publicly traded companies to invest in the Colorado cannabis industry, before the first acquisitions under the new law were announced.
Then-Gov. John Hickenlooper vetoed the bill in 2018. Gov. Jared Polis signed the bill May 29, along with five other pro-cannabis measures.
Among the bill’s proponents was Medicine Man Technologies, a Denver-based publicly traded company that last week announced two major investments.
The company will acquire Los Sueños, which it called “North America’s largest sustainable cannabis farm,” reported Marijuana Business Daily. The farm is in Avondale, east of Pueblo along U.S. 50.
It also is acquiring Pueblo-based Mesa Organics (also known as Purplebees), Mesa Organics II and Mesa Organics III, “a leading cannabis dispensary and infused-products manufacturing company, utilizing pure CO2 extracts from the finest locally grown cannabis in Colorado.” The trio of companies is collectively known as MesaPur.
“The acquisition of Los Sueños and MesaPur was made possible by the passage of House Bill 19-1090, (which opened) Colorado’s cannabis industry to outside investors and enabl(ed) increased investment by venture capitalists and private equity firms,” a company news release said last week.
The second big investment news was that Dye Capital, which grew grocery-chain Albertsons from 1,000 to more than 2,200 stores, is investing $14 million into Medicine Man. Two of Dye’s board members, Jason Dye and Leo Rivera, will join Medicine Man’s board, with Dye coming on as chair.
Medicine Man CEO Andy Williams said the first set of deals won’t take effect until February at the earliest. That’s because HB 1090 requires the state Marijuana Enforcement Division to conduct a rule-making. Williams sits on the rule-making body.
“We have binding agreements in place,” he said Monday. One condition is that it can’t finalize the deal until the MED and all state and local authorities approve the transaction.
The bill doesn’t take effect until Nov. 1, so Medicine Man can file then for the change of licenses and what’s known as a suitability application, which looks for criminal history, for example.
Medicine Man operates several businesses: cultivation and four retail locations, and MedPharm Holdings, which manufactures products. The company also holds the nation’s only research license for cannabis tied to a traditional marijuana and recreational marijuana license.
Williams said the deals will make Medicine Man the largest cultivator of cannabis in the country and second-largest in the size of cultivating properties.
The deal with Dye Capital brings in expertise, he said, including investors who have billions of dollars of acquisition under their belts. It’s the largest-ever investment made in Medicine Man, Williams said.
The deals announced last week are just the tip of the iceberg. “We’re not sitting on our heels” with those acquisitions, Williams said. “We plan on acquiring a few more companies, and we plan to be one of if not the largest operator in Colorado” after those next deals are done. After that, the company plans to expand nationally and internationally.
Williams said HB 1090 will result in more jobs and possibly the largest cannabis operators moving their headquarters to Colorado. “I’m not the only one planning this kind of thing,” he added.
HB 1090 did more than open the door to new capital. It also ended a state law that limited out-of-state owners to 15 people. “That not only eliminates the potential for a public stock offering or a merger with a publicly held company, but it also shuts out capital raises from venture capital funds that have more than 15 investors,” said a March 1 analysis of the bill by Marijuana Business Daily.
After Hickenlooper’s veto last year, the industry experienced “a flight of capital ... deals fall apart ‘because investors wanted to go to friendlier states,’” Kristi Kelly of the Marijuana Industry Group in Denver told MBD.