In 2015, legal and medical marijuana sales totaled about $5.4 billion, up from $4.6 billion a year earlier, according to ArcView Market Research, which tracks the legal marijuana industry. ArcView expects growth to remain strong, forecasting the industry to rise to $6.7 billion this year and $21.8 billion by the end of the decade. Other analyst firms, such as GreenWave Advisors, have an even brighter outlook, suggesting sales could swell to as much as $25 billion by 2020.
However, because cannabis remains a Schedule I controlled substance and illegal on the federal level, Wall Street has mostly steered clear of the nascent industry even as it blossoms. Typically, Wall Street has the deck stacked against small, retail investors, locking them out from the widest growth potential, as funds, banks and accredited investors participate in Series A and Series B capital raises. In this case, the confluence of federal prohibition and the shyness of funds has created a unique situation in which small, retail investors have access to cannabis investment from the early stage.
Wall Street may be moving a little slowly, but it is not going to ignore potential industry growth of $16.4 billion (or 304%, using ArcView’s forecast) in four years. 2015 looked to be a bit of an inflection point for interest increasing across the industry. The momentum is owed in part to pioneering work by Privateer Holdings, a nearly six-year old private equity firm founded by Brendan Kennedy, Michael Blue, and Christian Groh. Ditching their jobs in venture capital and investment banking, the partners have created attention for the legitimate business opportunities offered by legal cannabis. In December 2013, Privateer closed the first multi-million-dollar fundraising round by an investment firm in the cannabis industry, raising $7 million. In 2015, they took it to the next level, closing a $75 million Series B round of funding that included Peter Thiel’s Founder’s Fund, marking the first large round of institutional funding for the industry.
Bank of America Merrill Lynch is eyeing the potential as well. In December, BofA released, “Medical Cannabis has high POTential: A joint biotech and tools Primer,” a research report on the marijuana industry, trumpeted as the first report on the space by a big bank. Treading carefully around the recreational component, the report was mostly focused on the medical opportunities related to cannabis, such as new drug development and life science tools used for things such as cannabis testing, research and quality controls.
Long-time marijuana advocate Willie Nelson found himself a partner in upstart private equity firm Tuatara Capital in September. Founded in 2014, Tuatara is now leading an investment group financing “Willie’s Reserve,” a cannabis brand to be sold in states where recreational marijuana is legal for adults. Similar to Privateer, Tuatara’s principals are well seasoned in funding and investment, including previous high-level positions at companies like Guggenheim Partners Capital Markets Group, Highbridge Principal Strategies and SS&C Technologies.
Big names and celebrities aren’t the only Wall Street veterans entering the business. iAnthus Capital Management, a privately-held company based in New York, is pioneering financing in the cannabis industry by providing vital value-added capital and management services to legal license holders across the U.S. iAnthus supports its licensed partners with an exceptional management team that combines deep experience in investment banking, corporate finance and traditional health care services with cannabis cultivation, derivative product manufacturing, dispensary operations and regulatory expertise.
Hadley Ford, managing director of iAnthus, is not disappointed that mainstream Wall Street has shuffled its feet. “It’s very rare, if not unheard of, to come across an opportunity essentially ahead of Wall Street,” Ford said in a phone conversation. Still, Ford cautioned self-directed investors to exercise caution because, “there are land mines everywhere,” that are difficult to avoid without the right resources to thoroughly vet a potential investment.
Ford and fellow iAnthus co-founder Randy Maslow are more examples of seasoned Wall Street veterans moving into the cannabis industry. Ford has decades of executive level investment banking and healthcare experience with Bank of America, Goldman Sachs and others. Maslow, a technology industry attorney, entrepreneur and senior executive, has a resume including roles as SVP, director and General Counsel at XO Communications and a founder of internet pioneer, IGE.
iAnthus, a name derived from the phonetic spelling of the Latin word meaning “continually in bloom,” is providing comprehensive solutions for financing and managing licensed cannabis cultivators, processors and dispensaries throughout the U.S. “I think the industry is just ahead of hockey stick type growth, so this is an ideal time to be in our position. There are many license holders that are in need of financing. Our team comes in, assesses the synergies and opportunity, and decides whether or not to make an investment,” explained Ford. “Our shareholders get to benefit from an opportunity before the big funds and banks have entered the market.”
There are common threads between companies like iAnthus, Tuatara and Privateer beyond the scope of similarities in the Wall Street backgrounds of the founders. There’s a quest to capitalize by legitimizing the industry. That translates to each company having teams with experience in capital, legal and industry performing intense due diligence on any possible investment, which selectively is weeding out the fundamentally weak companies. Generally speaking, they’re avoiding startups that are little more than a dream without assets or a management team with a lineage of success. At the moment, all three are private companies too, although iAnthus is expected to be heading into the public domain in the near term.
Ford says he’s looking forward to becoming a public entity and for what it means to iAnthus investors. “iAnthus will be a vehicle for the public to mitigate risk and participate in the burgeoning cannabis market. People are investing in us, but they are ultimately investing in a diversified portfolio of fully vetted cannabis investments. I find that very exciting.”
Distributed by Andrew Klips Managing Editor, Potnetwork.com
Company Name: iAnthus Capital Management
Contact Person: Alfia Muzio
Phone: (212) 479-2564
Address:420 Lexington Ave. Suite 300
City: New York
Country: United States