The cannabis market – including legal and ilicit markets combined is worth $65 billion
After the rollercoaster ride that kicked off 2022 in the markets, it’s time to spend some energy understanding what’s going on the cannabis stock sector of the market. With federal legalization continuing to be teased, as well as state-by-state legalization chugging along, what is next for the cannabis industry?
Today we sat down with Michael Perlman, EVP, Investor Relations and Treasury at Jushi Holdings Inc. (CSE:JUSH). Michael brings vast investor relations, marketing, finance, market intelligence, and treasury experience to his role as EVP of Investor Relations & Treasury at Jushi. Before joining Jushi, Michael served as head of Investor Relations and Treasurer at KLX Energy Services.
Schaeffers: What major opportunities do you see in the cannabis industry?
As it stands, the legal cannabis market is estimated to be worth $25 billion in revenue, where cannabis as a whole – including the illicit market – is worth $65 billion. The opportunity to draw more consumers into legal cannabis is a significant one, both for companies in the space and for consumers across the country. The continued push for legalization and decriminalization, coupled with our expanding retail presence and wide range of high-quality products, will result in solid growth in the coming years.
On the investment end, there is a major disconnect in market valuations when you compare those of multi-state operators (MSOs) to companies in more traditional industries. MSOs have a significantly higher growth rate, but receive a much lower valuation than companies in slower growth industries, presenting a major opportunity for investment right now. This disconnect is driven primarily by the inability of institutional investors to invest in the industry due to compliance issues, as well as prime brokers not being able to custody the shares and an all-around lack of access to traditional exchanges (NYSE and NASDAQ).
Schaeffer’s: What major obstacles do you see in the cannabis industry?
Operating a federally illegal business results in a number of obstacles. Compared to traditional retail businesses, working in cannabis is much more expensive; security infrastructure and personnel costs are higher, and the inability to accept credit cards results in a business that is very cash-heavy. In addition, the lack of access to traditional banks, higher cost of capital, and draconian 280E tax structure result in even the simplest of business operations into an undertaking. We also do not have access to tier 1 vendors, which impacts our day-to-day operations and results in inefficiencies within the business.
Schaeffer’s: What motivated you to join this stigmatized industry?
Prior to entering the cannabis space, I spent nearly twenty years in more mature businesses that were well past their initial growth ramp. I wanted to switch gears and be a part of a startup environment where I could not only make my own mark, but truly impact the company’s trajectory. Moreover, I was impressed by Jushi’s senior management and the level of talent they already had on hand for a company of its size. The growth profile of the industry and the company struck me as truly outstanding, and I continue to hold a strong belief in the business strategy and the industry.