Dow Drops 1,400 Points and Tumbles into a Bear Market

The coronavirus-induced sell-off reached a new low on Wednesday as Wall Street grappled with the rapid spread of the virus as well as uncertainty around a fiscal response to curb slower economic growth resulting from the outbreak.

The Dow Jones Industrial Average tumbled 1,464.94 points, or 5.9%, to close at 23,553.22. The 30-stock average closed in a bear market, down more than 20% below the record close set only last month and putting to end an expansion that started in 2009 amid the financial crisis.

The S&P 500 ended the day 4.9% lower at 2,741.38 and just short of a bear market. The Nasdaq Composite fell 4.7% to 7,952.05 and was also about 19% below its all-time high. A 20% decline is considered a bear market on Wall Street. However, most investors don’t recognize it officially until an index does it on a closing basis.

“We can see the panic in the equity market,” said Jerry Braakman, chief investment officer of First American Trust. “The big question for most people is, are we at the bottom yet? I think we’re only about halfway there.”

Losses intensified on Wednesday after the World Health Organization declared the outbreak an official global pandemic. The number of coronavirus cases around the world totaled more than 100,000, according to data from Johns Hopkins University. In the U.S. alone, more than 1,000 cases have been confirmed. This increase in cases added to fears of a global economic slowdown and have increased calls for government intervention.

Continue reading at CNBC.com

Illinois Sells $1 Million in Legal Cannabis—Per Day

Just two months into adult-use legalization and Illinois dispensaries are selling more than a million dollars of legal cannabis—per day.

‘Today marks another milestone in the successful launch of Illinois’ legal cannabis industry.’

Toi Hutchinson, senior advisor, Governor Pritzker for cannabis control

That number is based off revenue from steep taxes on legal sales. The state reported $10 million in cannabis tax revenue for the month of January, Gov. JB Pritzker’s office reported Feb. 24. The report shows how legalization is off to a roaring start in the Land of Lincoln.

Robust marijuana sales started Jan. 1, 2020 to tens of thousands of state residents and tourists who braved freezing pre-dawn temperatures and hours-long lines to smoke a piece of state history.

Long lines continued for days as flowers and vapes supplies quickly ran low. Some stores closed to recreational consumers, but kept serving medical patients. The result? Over $39 million in taxed, tested cannabis transactions; instead of street sales. Those sales generated $7.3 million in cannabis tax revenue, plus $3.1 million in retail sales tax revenue for the month of January.

‘Successful launch’

After taxes pay for regulators, the revenue goes to communities impacted by the war on drugs, as well as anti-drug programs, and mental health programs. Illinois built on the work from 10 prior legalization states, said Toi Hutchinson, senior advisor to Governor Pritzker for cannabis control.

“Today marks another milestone in the successful launch of Illinois’ legal cannabis industry. Our goal has been to build the nation’s most socially equitable program that includes new opportunities for the communities most harmed by the failed war on drugs. Revenue raised in this first month will soon begin flowing back into those communities to begin repairing the damage done by the failed policies of the past and creating new opportunities for those who have been left behind for far too long,” said Hutchinson.

Continue reading at Leafly.com

Pursuing Alpha: Private Equity Opportunities in the Decade Ahead

From Manulife Investment Management

Key takeaways

  • Private equity capital has become a more prominent source for financing global commercial enterprise, and returns on that capital, less tied to beta than those from public markets, have helped raise the profile of private equity investing as an asset class around the world.
  • We see five ways in which private equity investing can continue to play a positive role in the years ahead, contributing to the betterment of investors, businesses, employees, pensioners, and economies across the globe.

Our economy is moving away from public companies

Amsterdam’s Stock Exchange was founded in 1602, and the Dutch East India Company was the world’s first listed public company.¹ While the number of stocks trading on public exchanges around the globe increased over the next four centuries, fewer companies are going public these days. There were 486 U.S. initial public offerings during 1999, but only 190 such offerings in 2018.² In fact, the total number of listed U.S. companies has fallen by over 40% since the late 1990s.³

Fewer companies are going public these days

Number of U.S. publicly listed companies, 1980-2018
Number of U.S. publicly listed companies, 1980–2018 The chart shows that the total number of listed U.S. companies has fallen by over 40% since peaking at over 8,000 in the late 1990s.

Source: Cerulli, 2019.

 

Meanwhile, the number of private equity-backed companies is on the rise and now dwarfs the number of companies listed on U.S. public equity exchanges—a trend that’s indicative of what’s happening around the world. Globally, there were 9,000 private equity deals done in 2018, compared with just 1,700 in 2001.⁴ The growth of private equity assets under management has been brisk, too, especially in Asia, which now accounts for one-quarter of the global private equity market.⁵

 

U.S. private equity-backed companies now outnumber listed companies

U.S. private equity-backed companies now outnumber listed equities The table shows that the total number of U.S. private equity-backed companies has doubled between 2006 and 2017 while the number of U.S. publicly traded companies has declined.

Source: McKinsey, 2019.

 

 

Unlike a typical public equity shareholder, who has no influence on how a corporation is run, private equity funds often take controlling positions in portfolio companies and become actively involved in setting the strategic direction of these companies. Board control ultimately represents an owner’s call option on management regime change. Even if the owner never has cause to exercise the option, the arrangement tends to align executive teams’ interests with those of the business owners, encouraging all involved to focus exclusively on the opportunities and risks most crucial to the long-term success or failure of the business. Whereas their publicly traded counterparts are frequently plagued by distraction and Wall Street’s fixation on short-term results, well-run private equity-backed companies tend to benefit from an incentive structure and timeline that encourages a management team to deploy its best thinking and energies on the two or three most meaningful objectives likely to drive long-term value creation. Private equity is about pairing talented investors with exceptional management teams and using their collective wisdom to get the job done together.

 

Private equity assets have more than doubled in less than a decade

Global private equity assets, 2009-2Q 2018 ($U.S. billions)
Global private equity assets, 2009 to mid 2018 ($US billions) The chart shows that global private equity assets have climbed to over $3.4 trillion as of mid 2018, up from less than $1.6 trillion at the end of 2009.

Source: Cerulli, 2019.

 

There are a number of factors behind the shift from public to private capital, yet we can point to two changes in U.S. law that played a role in a multi-year trend that continues today. The Sarbanes-Oxley Act of 2002, for example, a response to the wave of accounting fraud scandals epitomized by Enron’s collapse, made reporting requirements for U.S. public companies more onerous than they had been before. A decade later, the U.S. Jumpstart Our Business Startups (JOBS) Act, a different type of law designed to address a different problem, allowed private companies to have up to 2,000 shareholders (an increase from only 500) before being required to disclose their results. Both Sarbanes-Oxley and JOBS had unintended knock-on effects, providing less incentive for companies to go public and more incentive for them to remain in, or return to, private hands. It’s particularly true for capital-light, R&D-intensive firms that wish to keep their proprietary intellectual capital out of view of competitors and the public spotlight alike. And the global economy is seemingly shifting such that most companies now see their intangible assets as more important than their tangible assets.⁶

“Private equity is about pairing talented investors with exceptional management teams and using their collective wisdom to get the job done together.”

 

Global central banks have also helped fuel the transition in recent years, as low interest rates have made it easier for private equity investors to transact with borrowed funds. More than a decade after the depths of the global financial crisis, policy rates remain at or near record lows around the world, and an abundance of relatively cheap debt with issuer-friendly terms is still available to finance acquisitions.

The intersection of private equity and alpha

While legislative, macroeconomic, and monetary policy developments have helped private equity capital become a more prominent source for financing global commercial enterprise, the returns on that capital have helped raise the profile of private equity as an investment asset class around the world.

Some of the most sophisticated institutional investors have been shifting portfolio allocations toward private equity and away from public equities for years. For example, the dollar-weighted average allocation of all U.S. higher education endowments to private equity more than tripled (from 3% to 10%) between 2002 and 2018, while the allocation to domestic public equities declined by over half (from 37% to 16%) during that period.⁷ Today, roughly 60% of private equity investors are university endowments, charitable foundations, and employee pension funds.⁸

“… private equity may still represent the brightest light in a dimming universe of investment prospects hampered by today’s high asset valuations and low yields.”

 

So far, the allocation shift toward private equity has worked out in favor of these institutions and their beneficiaries. Global private equity net asset value has grown by a factor of 7½ since 2002, compared with a 3½-fold increase in public equities’ market capitalization over the same period.⁴ Following this impressive outperformance run, private equity may still represent the brightest light in a dimming universe of investment prospects hampered by today’s high asset valuations and low yields. The reason is that, relative to listed public equities, regression analysis reveals that private equity performance has been driven more by alpha and less by beta, “and equally as important, is that alpha is generally less correlated than beta.”⁹

Private equity is driven less by beta and more by alpha

Alpha and beta vs. MSCI ACWI (Gross USD), 2000-2018¹⁰
Alpha and beta vs. MSCI All Country World Index (gross USD), 2000–2018 This chart shows the global private equity data captured by Cambridge Associates has had a long-run average beta of 0.5 relative vs. the MSCI All Country World Index, while the eVestment Median Liquid Market Fund, a proxy for public equity strategies, has had a long-run average beta of 0.9. Note: Cambridge Associates’ database utilizes the quarterly unaudited and annual audited fund financial statements produced by the fund managers (GPs) for their Limited Partners (LPs). These documents are provided to Cambridge Associates by the fund managers themselves. Calculations are based on data compiled from 2,193 private equity funds.

Source: Cambridge Associates, eVestment, Bloomberg, KKR, 2019.

 

Whereas the current beta embedded in public markets’ capitalization is by definition skewed toward past winners, we believe today’s private equity deal counts are more indicative of future prospects. Investors around the world have taken notice. That’s likely one reason the recent growth of private equity assets under management has been so rapid, not only in North America and Europe, but also in the Asia-Pacific region, now home to a quarter of the world’s private equity market.⁵

The illiquidity premium—the reward investors earn for bearing the risk of holding assets that can’t be easily traded—represents a meaningful prospective source of private equity alpha. It may be an attractive feature to institutional investors with long-dated liabilities, such as insurers and pension plans. The largest U.S.-based investor in private equity, a public pension plan in California, isn’t satisfied with its existing allocation to the asset class. “We need private equity, we need more of it, and we need it now,” according to its chief investment officer.³ Even if private equity isn’t poised to match its past results, many investors still view it as the most promising asset class on offer today. In fact, 95% of a representative sample of 400 institutional investors surveyed in the United States plan to either increase or maintain their long-term allocations to the asset class.³

Private equity investors plan to increase or maintain their allocations

Institutional investors’ private equity long-term allocation plans, 2018
Institutional investors’ private equity long-term allocation plans, 2018 This chart shows that institutional investors with exposure to private equity overwhelmingly plan to either maintain their existing allocations to the asset class or increase their allocations. Only 5% of institutions surveyed plan to decrease their allocations.

Source: Cerulli, 2019.

 

Flexibility and patience can be additional sources of alpha for private equity investors who carefully choose portfolio companies offering the potential of multiple ways to win, and being able to pivot as developments warrant can prove highly valuable. Characteristics of promising investment opportunities may include companies with:

  • High-quality management teams
  • Strong recurring revenues and organic earnings growth in an industry enjoying structural tailwinds
  • Businesses that operate in industries with strong barriers to entry
  • Low capital intensity
  • High operating leverage—the ability for each incremental dollar of revenue to flow through as fully as possible to the bottom line, with margins expanding along with the scale of business

While these characteristics are good indicators of a successful business, overbidding for such traits is an ever-present pitfall. If a private equity sponsor pays too much for its portfolio companies, it may struggle to create value for investors. Consequently, it makes sense to look for managers who have good judgment about the inherent value of a particular business and extensive experience executing strategies that would make the business more profitable—and, by extension, more valuable.

Private equity’s public relations problem

Although the industry is maturing, we continue to see private equity participants get criticized for behaviors that were more prevalent during the industry’s infancy, evoking a popular narrative rife with corporate raiders, hostile takeovers, and junk bond-financed mergers and acquisitions. Barbarians at the Gate (1989), Den of Thieves (1992), and The Predators’ Ball (1988), and other books relayed the most egregious examples of the day’s dubious practices.

In the late 1980s and early 1990s, many industry firms spearheaded deals by contributing equity capital representing only 10% to 20% of the entire enterprise value, borrowing the rest of the funds required to close the transaction. This left many private equity-backed companies overleveraged and with little financial flexibility to weather a downturn in the economic cycle. The business failures, bankruptcy filings, and personnel reductions that inevitably followed continue to haunt the industry’s reputation today.

Private equity has come a long way since then. Rather than relying on abrupt practices, such as asset stripping and employee layoffs, to cut costs and turn a quick profit, private equity investing has become more focused on driving growth, improving competitive positioning, and focusing on sustainable, long-term value creation. We’re seeing many portfolio companies scaling their businesses, executing thoughtful merger-and-acquisition plans to drive top-line growth, and generating value where it didn’t exist before. In our experience, the more recent reality debunks the popular narrative of frequent bankruptcies, unmet pension obligations, and job destruction—stories of high-profile deals gone awry that marked private equity’s early days. Further, in the current climate, it’s not uncommon for owners to contribute 40%, 50%, or even 60% of the total enterprise value of an acquired business in their own equity capital, which lessens the need for borrowed money and increases the financial flexibility of a firm to negotiate the next recession, whenever it arrives.

“In many ways, private equity has become a driver of efficient, responsible, and sustainable capital allocation, helping investors, companies, and their communities.”

A growing force for building corporate value

Our experience provides a counterpoint to the negative private equity narrative. In many ways, private equity has become a driver of efficient, responsible, and sustainable capital allocation, helping investors, companies, and their communities. While this may be oversimplifying the ways in which private equity firms add value to portfolio companies, we’ve observed countless examples in each of the following generic strategies that have created value for investors in private equity funds.

First institutional capital may work well in the current environment

Investors vs. fund managers: views on private equity pricing, 2018¹¹
Institutional investors vs. fund managers: views on private equity pricing, 2018 This chart shows that the majority of private equity fund managers and institutional investors agree that private equity valuations are reasonably high, based on a representative survey of 400 professional and institutional investors in the United States.

Source: Cerulli, 2019.

 

  1. First institutional capital—Many successful business founder-owners eventually find their personal wealth concentrated in the equity of their own businesses, and they often want to diversify their net worth without forfeiting their involvement in what they’ve worked so hard to create. In addition, this concentration of considerable wealth in a single asset can lead the owner-manager to adopt a posture of risk avoidance that hampers further growth.  For example, opportunities to expand into a new geography or launch a new product line are dismissed because they’re perceived as uncertain. These owner-managers may be gifted entrepreneurs who build something out of nothing, but it takes a different set of skills and experience to take a mature business to the next level. At a certain point they need liquidity, wealth diversification, expertise, and partnership to allow them to continue investing in the future. For them, selecting the right buyer is as important as getting the price right. For private equity firms that can build rapport with the owner and describe an attractive plan for further wealth creation, there is an opportunity to acquire a good asset at a reasonable price. In addition, many of these businesses offer the proverbial low hanging fruit: clear value-creation opportunities that have been neglected or underappreciated by the founder. When owners are obsessed with not losing what they have, it’s hard for them to think about growing their businesses. These types of situations can work well for private equity investors and founder-owners alike, particularly in today’s market, where valuations are reasonably high.
  2. Buy-and-build strategies—A growing contingent of private equity funds has been contending with higher deal multiples—good if you’re selling but not good if you’re buying—through what’s known as a buy-and-build approach, “an explicit strategy for building value by using a well-positioned platform company to make at least four sequential add-on acquisitions of smaller companies.”⁵ A fund purchases a promising company and builds it to scale through the acquisition of a series of smaller, cheaper companies within the same industry or in a related industry. Since smaller companies tend to change hands with lower earnings multiples than larger companies do, a buy-and-build strategy allows the fund to capture the multiple arbitrage—buying businesses at relatively low multiples and integrating them into a larger organization with increased operating leverage that merits a higher multiple. However, the integration risks are real, and investors sometimes underestimate them. Very few private equity firms get high marks in the nuanced art of marrying divergent corporate cultures into a unified whole.
  3. Good-to-great approach—As the private equity markets have grown, it’s not uncommon to see the sale of a business from one sponsor to another. Industry observers sometimes wonder about the advisability of this for the buyer; if the business was professionalized and grown by the selling private equity firm, what value remains to be captured by the buying private equity firm? Sponsor-to-sponsor transactions aren’t inherently riskier, provided that the buyer has a credible value-creation plan for the business and plans to improve upon the gains made by the seller. The buyer takes a good business and makes it great by adding to the company’s capabilities.  This can take many forms, such as expanding internationally, upgrading management systems, and tapping top-grade managerial talent. This strategy isn’t only carried out though sponsor-to-sponsor transactions, it can also apply to buying a truly strong founder-owned business or a business acquired in a corporate carve-out transaction.
  4. Scratch-and-dent opportunities—Attractive private equity targets aren’t always perfect; sometimes they’re businesses with something that’s broken or complex, which causes the business to trade at a meaningful discount to its potential value. Firms that can repair these businesses and remove the elements of complexity can own a business that comes out the other end of this process displaying stronger growth and improved valuation metrics. Executing this strategy requires the right types of operating talent to make fundamental, often disruptive, changes to the portfolio company’s operations. These turnarounds can be difficult, but the rewards for success can be considerable. In an extreme example, one private equity firm was provided with an opportunity to acquire a broken business in a corporate carve-out transaction. The corporate seller found itself losing millions of dollars per year and could not identify a way to return the business to profitability. Ultimately, the corporate seller paid the private equity sponsor to take it off the seller’s hands. After executing on a series of identified initiatives and strategic acquisition, the private equity firm was able to return the company to profitability, representing a unique case of what we would call scratch-and-dent investing.
  5. Distressed-for-control investing—Distressed-for-control investing involves exchanging the debt securities of a target business for equity securities in the same company—generally a controlling ownership position. This form of value investing can be rewarding when a fundamentally sound business becomes overleveraged to the point that it can’t meet its current obligations. Sometimes what’s broken in a business can impair its balance sheet, with loan defaults resulting from an unexpected change in the global business environment. An investor in a distressed enterprise has the opportunity to earn an attractive return while rescuing a business that may be on the brink of extinction. A capital-structure-agnostic view helps in these special situations. Private equity investors that have the agility to pursue opportunities across the capital structure can enjoy outsize gains if they select the right part of the capital structure of the right company at the right time. However, this strategy has risks that can’t be taken lightly. It takes years of experience, for example, to understand which securities will control the restructuring, whether or not the debt securities can be exchanged for a controlling position, and, most importantly, to know what to do with the business once you own it. 

Conclusion

Today, private equity helps align the interests of owners and management, helps the capital markets operate more efficiently, and spurs productivity growth. Private equity continues to evolve and provide an incubator for ideas that lead to accelerated business growth, new ways to finance businesses, and employment growth—big thinking that contributes to better living standards more broadly. Private equity investing can continue to build this momentum as a growing force for good and play a positive role in the years ahead, contributing to the collective betterment of an interconnected web of company owners, managers, employees, pensioners, and communities throughout the global economy.

Jim Belushi’s Cannabis Mission

Jim Belushi says the tragic death of his brother John (the actor, comedian and musician known for his roles on sketch comedy show “Saturday Night Live,” “National Lampoon’s Animal House” and the cult classic film “The Blues Brothers”) in 1982 ripped a hole in his family, leaving trauma and pain. “Addiction enters a family like a snake and starts to squeeze until somebody dies,” he says. “It collapses families.”

A famed actor, comedian and musician in his own right, Belushi spent years wrestling with John’s death, searching for meaning and purpose to it. It wasn’t until 2016, when he began cultivating cannabis on a farm he had acquired in Eagle Point, Ore., that he started to find answers to his questions. He’s not sure why cannabis cultivation appealed to him, but he’s adamant that he’s a changed person for it.

“Why am I doing this? I don’t know. I kind of stumbled into it, but it’s leading me to an understanding of my own brother’s death, the trouble that it caused in my family, the collapse of my family,” Belushi says. “And ever since I’ve been working with this cannabis, I’ve come a long way in healing all of that.”

With that newfound perspective, Belushi feels a responsibility to use his celebrity status to build a business that might help other individuals and families process their traumas. Thus, Belushi’s Farm was born.

Continue story at Cannabis Business Times

Cannabis Industry: 2020 Predictions

Cannabis sales have increased substantially in the last few years, but so has the competition with more growers, retailers and other entrepreneurs vying for a stake in the “green rush.” At the same time, an oversupply of marijuana and the cost of operating in this highly regulated industry are taking their toll.

Here, industry executives predict top trends for 2020.

Cannabis Legalization Is Going Global

Legalization is growing outside of the United States, and countries that are first to the global marketplace can create sustainable advantages for themselves in their customer base and their funding. Kyle Detwiler, chief executive of Clever Leaves, an international operator with brands, extraction facilities, cultivation operations, and other investments in six countries, says that countries like Colombia and Portugal that have been among the first to legalize cannabis “are poised to continue establishing their global dominance in short order.”

The countries’ first-mover status will also be a magnet for financial interest he said. “There is little doubt that the expanding European cannabis market will make it an attractive investment opportunity,” Detwiler said.

Hemp, the source for CBD in many non-psychoactive products, will expand internationally as well, driven by the CBD’s demand. The CBD market will grow to $2.1 billion in consumer sales by 2020 according to the Hemp Business Journal, with $450 million of those sales coming from hemp-based sources. Puerto Rico’s Department of Agriculture has already reported there will be at least 10,000 acres of hemp cultivated for commercial purposes in 2020.

Read More Here at Forbes

Illinois’ Cannabis Debut Beat All States Except One

(Bloomberg) — Illinois per-capita recreational pot sales topped every state but one in its debut month.

The state logged $39.2 million of adult-use recreational marijuana sales in January, or $3.07 in sales per resident, according to New Frontier Data, a cannabis research company. Those are the second-highest sales per capita during the first full month of legalization among eight other states where adults can buy pot for recreational use. Nevada was the highest at $8.88 per capita in July 2017, a figure bolstered by tourism, according to Kacey Morrissey, New Frontier’s director of industry analytics.

Illinois’s performance is “typical for first month’s sales,” Beau Whitney, executive vice president and senior economist at New Frontier, said in an email. “Illinois is fairly strong out of the gate.”

On Jan. 1, Illinois became the 11th state to legalize recreational use of the drug. The fervor around the industry’s prospects has been strong especially as Illinois, which has the lowest-credit rating of all 50 states, needs revenue. With nearly 13 million residents and more than 100 million tourists a year, Illinois is expected to be the largest adult-use market in the Midwest and annual sales could reach $4 billion when the market matures, according to Cresco Labs Inc., the state’s largest cannabis operator by capacity.

Illinois “had the most successful roll out in the industry,” Boris Jordan, executive chairman of Curaleaf Holdings Inc., said in an interview. Curaleaf is the largest U.S. cannabis company and its pending purchase of Chicago-based GR Companies Inc., better known as Grassroots, is expected to close in the second quarter, giving it a foothold in the Illinois market.

Sales during the first full month of legalization in other states were impacted by a combination of factors, including a limited number of retail locations, according to spokesmen from Oregon, Washington and Michigan.

Given Vermont does not have recreational dispensaries and Maine has not officially begun adult-use cannabis sales, these two states were not included in the data, according to New Frontier’s Morrissey.

Companies are rushing to ramp up production in Illinois given demand is expected to exceed supply for at least another year, Curaleaf’s Jordan said. Products sold in Illinois must be from cultivators, growers or dispensaries in the state as marijuana is still illegal under federal law.

The first month, especially the early days, saw long lines and some shortage of flower, according to the Cannabis Business Association of Illinois. The state has deliberately tried to temper growth and manage expectations to balance social equity, criminal justice reform and revenue, said Toi Hutchinson, senior advisor for cannabis control to Governor J.B. Pritzker.

“I didn’t have a $40 million benchmark,” Hutchinson said in a telephone interview on Monday after the sales data was released. “The strong start is what we hoped for” but Hutchinson said the sales figure “is surprising to us.”

About a quarter of the state’s take will go toward community reinvestment partly to reverse some of the challenges from past drug policy, according to Hutchinson. Collections may also help chip away at Illinois’s $6.2 billion of unpaid bills and $137 billion of pension debt. Tax collections on legal pot are forecast to jump from $34 million in 2020 to $375.5 million in 2024, according to the Illinois Department of Revenue.

Revenue from the industry is hard to predict. First month sales aren’t necessarily indicators of the future, according to Alexandria Zhang, research officer for The Pew Charitable Trusts.

Some evidence also indicates growth and revenue collections “tend to slow as markets mature” even after strong initial performance, Zhang said in an interview. “Early revenue collections don’t mean the strong growth will continue in the long run.”

Illinois’s Pritzker will unveil his 2021 budget on Feb. 19 and the role marijuana tax collections will play remains to be seen. During his “State of the State” speech last week, he mentioned legalization as “a chance to collect tax revenue from the residents of Wisconsin, Missouri, Iowa and Indiana,” where recreational cannabis is illegal. He also highlighted the criminal justice reform that his administration also enacted, including 11,017 pardons for people with low-level cannabis convictions under the state’s new cannabis law.

Extrapolating from Colorado’s legalization experience, Illinois sales will amount to $3.7 billion in five years, Cantor Fitzgerald analyst Pablo Zuanic wrote in a note published Feb. 4.

The January data “support even the most bullish projections for recreational consumption in the state of Illinois,” Zuanic said.

Data Proves Cannabis Dispensaries Increase Property Values

As more states approve medical cannabis and legalize recreational cannabis, the amount of data proving that cannabis dispensaries increase local property values continues to pile up.

Numerous studies conducted by researchers, companies, and even real estate associations not only show that property values increase when dispensaries open nearby but also that property values jump when cannabis is legalized at the state level – long before legal retail dispensaries open.

Despite arguments to the contrary, the cannabis industry bolsters commercial and residential real estate investments. The numbers speak for themselves.

Here’s What the Data Says about Cannabis Dispensaries and Property Values

The Western Economic Association International published a study in its July 2019 Contemporary Economic Policy journal that found property values within a half-mile radius of a cannabis dispensary increase by 7.7%, and the value drops as the distance from the dispensary increases.

Also in 2019, the team at Clever Real Estate conducted a deep analysis of housing prices and the relationship between property values and cannabis dispensary locations. They discovered that between 2014 and 2019, cities which allow cannabis dispensaries (medical and/or recreational) experienced greater increases in home values than cities where cannabis is illegal. Clever Real Estate found that the effect brings up the entire city’s home values at a rate higher than the national average.

Read More at Cannabis Business Executive

Several States Could Legalize Cannabis Sales in 2020 as Marijuana Industry Eyes Lucrative East Coast Market

Up to a dozen states could legalize adult-use or medical marijuana in 2020 through their legislatures or ballot measures, although only about a handful will likely do so.

Much of the cannabis industry’s focus will home in on a possible recreational marijuana domino effect along the East Coast, which could create billions of dollars in business opportunities.

Potential legalization activity runs from the Southwest to the Dakotas to the Deep South. Mississippi in particular has a business-friendly medical cannabis initiative that has qualified for the 2020 ballot.Adult-use legalization efforts in New York and New Jersey stalled in 2019, but optimism has rekindled this year.

Here are three factors to keep in mind as states address either recreational or medical legalization this year:

1. In the past, marijuana legalization has primarily occurred through the ballot box. But in a momentous development, Illinois legalized a projected $2 billion adult-use program through its Legislature in 2019. Expect that trend to amplify in 2020. “Increasingly, legalization is moving toward legislatures,” said Karen O’Keefe, director of state policies for the Marijuana Policy Project. “That’s the biggest shift.”

2. State marijuana laws historically have reflected a patchwork of regulations. But a more mature industry means that legalization increasingly involves conversations over what has worked and hasn’t worked in legal states. The lack of industry diversity is one common topic. “There’s a strong focus on making sure communities most hard-hit by the war on drugs benefit,” O’Keefe noted.

3. Democratic governors in the Northeast are trying to coordinate adult-use legalization efforts. New York Gov. Andrew Cuomo hosted a summit in October to begin discussing common approaches to licensing, taxation, minority and small-business participation, product potency and other issues. Cannabis businesses would still need a lot of resources to apply for licenses and to operate on the East Coast, but they might be able to use one application as a template for others in the region. But experts say a regional approach is easier said than done, with each state facing its own internal politics.

Read More at hmjbizdaily.com

South Dakota Becomes First State to Place Medical and Adult-Use Cannabis Initiatives on Same Ballot

Last week, South Dakota became the first state to place medical and adult-use cannabis legalization measures on the same ballot, a situation that has its challenges, as well as unique opportunities, according to Marijuana Policy Project (MPP) Deputy Director Matthew Schweich.

“It’s exciting that we’re able to make progress more quickly, and we did our research and we found that a majority of South Dakota voters support both medical marijuana and adult-use legalization,” Schweich told Cannabis Business Times. “We’ve done our homework and we’re confident that both can pass if we run an efficient campaign.”

South Dakota is currently one of three U.S. states that has no legal cannabis program on the books whatsoever.

The Secretary of State officially certified the adult-use legalization initiative, led by South Dakotans for Better Marijuana Laws, on Jan. 6, after the campaign submitted over 50,000 signatures.

Continue Reading at cannabisbusinesstimes.com

Utah to Award Medical Marijuana Dispensary Licenses

Utah health officials plan to award pharmacy licenses to 10 companies to dispense medical marijuana at 14 sites across the state.

The issuance of licenses in Utah is considered a milestone development for the launch of the program later this year.At least three of the licenses were awarded to multistate marijuana operators – Bloom Medicinals of Florida, Columbia Care of Illinois and Curaleaf of Massachusetts.

The sites chosen by the state health department are largely in metro Salt Lake City or elsewhere in northern Utah. However, they also include two in southern Utah and one in rural eastern Utah.

Eight sites might open as early as March while others would open by July, the department said.

Dispensaries in Utah might face licensing fees of $50,000 to almost $70,000 in a market where medical marijuana sales could reach $25 million-$35 million by 2022, according to Marijuana Business Daily projections.

– Associated Press

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