Three US Cannabis MSOs to watch

The US Cannabis Industry – the richest race of them all

Recently, we published an article on the US cannabis market and went on to describe just how big it potentially could be. Cowen and Co estimate that by 2030, the US cannabis industry will be worth over $75 billion. In fact, based on the current growth rate of the industry, more cannabis will be sold in 2030 than soda drinks. Crazy right?

US Cannabis Industry Medicinal recreational

There's no doubt that the US cannabis market is the most lucrative one on the planet, and most cannabis analysts agree that investors should have some exposure to this market if they are going to drive solid portfolio returns in the coming years.

Right now, across the US, there is a vicious land grab going on. Cannabis companies are setting up shop in every State they can and growing at uber-aggressive rates. These companies are known as Multi-State Operators (MSOs) as they set up shop in different states across the US.

The US still considers cannabis illegal at the Federal Level. Cannabis is a Schedule 1 drug along with heroin and cocaine, and as a result, cannot be transported across state lines (even from one recreationally legal state to another). This issue thus requires all multi-state operators to be vertically-integrated in each of the states they operate in.

This means that they can maximise profitability across the entire value chain.  They cultivate, manufacture, distribute and sell their cannabis through their retail outlets. These entities are usually structured as holdings companies with separate state subsidiaries that hold state licenses for these activities.

The who's who of Whoville

Although there are many MSOs that operate across the US, there is only a handful that we believe have the infrastructure, reach, brand, and importantly, cash to be able to take advantage of the current land grab.  No one company dominates the US yet, and right now there are essentially two models, or two paths, that MSOs can use to drive growth.

The first is expansion at any cost. The current market conditions mean that there is no clear leader in the market. Thus, some of the MSOs are expanding as fast as they can, and in doing so they are either acquiring companies or buying up licenses in additional states and then pumping cash into these markets as they setup vertically-integrated operations starting with large scale cultivation and manufacturing facilities.

The other strategy is to grow organically. Start in one state and get the model right. Become profitable and then expand from there. One of the MSOs below has completely mastered this strategy but does have investors questioning whether they can now replicate this organically from state to state.

No one knows which of these will ultimately end up being the right strategy, hence right now, we think investors should take a basket approach to investing in the US MSOs. Here are three we think have a greater than average chance of succeeding in this incredibly competitive and aggressive race.


Trulieve is a cultivation, processing, retail, and distribution medical cannabis company, based in Florida. The company boasts the highest patient count, dispensary count, cannabis sales and revenue of any cannabis company currently operating in the Florida market – considered to be one of the most valuable states in the US.

In their recent quarterly earnings call, Trulieve went on to give significant guidance for their Full Year 2019.

  • Revenue is expected to grow 108% to approximately $214m
  • Anticipated gross profit of approximately $145M for 2019, or 68% gross margins
  • An adjusted EBITDA of approximately $92M, or 43% of revenue, reflecting the continued leverage of scale and financial discipline.

This is one of the best run MSOs in the market right now. One of only a handful of female CEOs – Kim Rivers – has done a phenomenal job in leveraging first-mover advantage to create market dominance. 

One of the issues they faced recently has been a lack of cash on the balance sheet. Not too little as to restrict the organic growth of the company, but not enough to carry on the planned expansions into other States (Arizona and California as a start).

However, a recent financing deal (and very well structured at that) has ticked that box and we cannot see any reason why Kim and her team won't deliver on their guidance. One to watch, closely.


With 84 potential retail licenses, across 12 US States, and boasting more than 2 million recreational transactions to date, MedMen is one of the largest MSO's in the US. Based in California, their stores occupy prominent locations in the highest-end neighbourhoods in the U.S., including West Hollywood, Beverly Hills, Venice Beach, Fifth Avenue in New York, Las Vegas, and at the LAX airport. Often nicknamed the "Apple of weed", their stores are famous for their stylish interiors and upscale retail experience.

Recently, MedMen has been on a massive expansion campaign, buying dispensaries in Arizona, Northern California, and Illinois, and capping it off with a massive $682 million purchase of PharmaCann. The PharmaCann acquisition allowed MedMen to expand into the states of Pennsylvania, Maryland, Massachusetts, Ohio, Virginia, and Michigan, in addition to gaining dispensaries in New York and Illinois.

Then recently MedMen paid over $50 million to gain access to the Florida market. Their aim is to replicate their successful Californian strategy in a State that is considered by many to be one of the most valuable in the US. Although Florida is currently a medicinal-only state, when the laws do change and they open up to recreational cannabis, MedMen could be very well positioned to capitalise on this, given they are the most recognisable brand in the US.

No one has expanded as aggressively as MedMen and, as a result, their cash burn has been far greater than any of their peers. But with the recent financing deal from Gotham Green (one of the smartest investment companies in the space), MedMen is likely fully funded for its initiatives as it looks to steer towards profitability in the coming quarters.

Green Thumb Industries

Founded in 2014, Chicago-based Green Thumb Industries (GTI) s a vertically-integrated cannabis producer that operates in 11 US States, covering over 145 million Americans (45% of the population).

GTI is one of the larger US Multi-State Operators (MSO), and currently operates 14 dispensaries with licenses to open another 85. They have spent significantly in the past couple of months to grow their operations and US market reach. They have a slightly different mentality to the rest of the pack.

GTI has both a retail and wholesale model. They operate their own dispensaries (under their RISE brand) and, in addition, wholesale their products to other dispensaries. This is particularly synergistic to their "big fish small pond" strategy in that there are only a limited number of stores in these "limited-states" and with a wholesale model, GTI gets to potentially supply them all.

Although GTI currently trades at a higher multiple of annualised revenue to market cap than MedMen and Trulieve, both of them do have their issues.

MedMen is burning cash like there is no tomorrow, growing new states faster than it can grow weed, whilst Trulieve is being penalised for being a single state player in Florida only. This puts GTI almost in the middle with its aggressive expansion associated with only minor cash burn.

The Bottom Line

For the past couple of years, investors have raked in significant gains playing the Canadian Licensed Producers. However, we believe that the time for ten-bagger returns in Canada has come to an end. Investors looking for the next wave of the green rush, need to look to Canada's Southern neighbour – the good old USA.

Ten times bigger than Canada, and still fragmented and cottage, given the Federal Illegality of cannabis, the US – once legalised – offers significant upside for investors that back the right horses. The horse race is the MSO classic, and the above three are well set for a good run.

And they're off…

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Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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