The cannabis industry is in a moment in time that is like nothing anyone in the industry has ever seen, according to investment guru Chris Leavy, and cannabis business owners are in the driver’s seat.
Leavy, who worked as the chief investment officer of fundamental equities at BlackRock, the world’s largest money manager, jumped into the cannabis business when he joined MedMen in April as co-chairman and partner. He co-chaired a private equity fund – MedMen Opportunity Fund II – to raise $250 million to invest in cannabis businesses in what are considered high-growth demographics – Los Angeles, Las Vegas, and New York.
So far, this most recent opportunity fund, announced June 29, has raised over $17.5 million. The original incarnation of the MedMen Opportunity Fund raised $60 million and closed in April, according to an article in Forbes magazine. The original opportunity fund invested in seven projects in the U.S., with a stake in MedReleaf in Canada, according to Forbes.
The fund is designed to pursue strategic investments in supply-constrained, high barrier to entry markets and be diversified on both an asset and geographic basis. It will also own a portion of MedMen’s management company, which will serve as the fund’s captive operating partner.
In his presentation at the MJ Biz Conference in early November, Leavy said that there will be growth beyond $30 billion as cannabis gets legalized because there are a lot of consumers that will try it once it’s legal,” he said. “But don’t take my word for it. Look at the alcohol industry and how disruptive its been in Colorado where beer sales are trending down five percent a year.”
That, and the fact that both the big players in the pharmaceutical industry are among the top five donors to anti-legalization effort, means that this industry has become a vital market for the growth of the national economy, and that the influence of the industry is being felt like never before.
“There are now more dispensaries in Colorado than Starbucks,” he said.
He talked about the valuation of the industry now and how that appeals to investors. “There has been two trillion raised in capital over the last four years,” he said. “Of that capital, there is $1.5 trillion chasing deals. But there is just too much money out there chasing deals, and they can’t touch cannabis right now because of federal restrictions. But I think that is changing. And that is why this is a buyer’s market.”
He said that he has not been worried about the perceived federal and policy risk. “When it comes to policy and risk, always look through the noise,” he said. “Some of that is public opinion and the other is money.”
According to a recent Gallup poll, 64 percent of Americans think marijuana should be legalized. Over half of all Republicans – 51 percent – now believe that marijuana should be legalized, up nine points from the same poll in 2016.
“When federal prohibition ends, investors with that $1.5 trillion are going to love this industry,” Leavy said. “It has zoning and regulations and positive cash flow, and other controls. They are going to love this industry.”
He reminded the audience that already a Fortune 500 business, the $42 billion beer and spirits company Constellation Brands, is now in the cannabis business, reportedly invested $191 million in Canadian medical marijuana company Canopy Growth.
He pointed out that, as a result of the Canopy deal, the top ten investors in Constellation – including The Vanguard Group, BlackRock Institutional Trust Company, and JP Morgan Chase – are now investors in the cannabis business. “You are never going to see better deals than today,” he concluded.