Florida Adult Use Cannabis: The Best Laid Plans
"Be fearful when others are greedy, and greedy when others are fearful" Warren Buffet
Many people are already caught in the FL referendum hype machine. While some euphoria is understandable, one might think they are watching a Netflix cannabis series titled, Expand to Survive
FL has risks, galore. A MSO’s best laid plans rest on how they consider some key questions and strategic & financial assumptions, including their ability to control FOMO and learn from experience.
1. Will the referendum pass and lead to legalization?
I would make that wager but not mortgage my house to do it. Consider rejection states like Hawaii, South Dakota and Minnesota that went against voter sentiments. Lots can happen between now and when a bill is signed into law. Prohibition forces (with support from a popular Governor) will aggressively mobilize against a Yes vote.
The Dank Informer is a respected cannabis investor and market strategist. He analyzed the chances of the FL adult use ballot passing, using Ohio’s 2023 cannabis referendum for comparative purposes.
Both states have abortion and adult use cannabis ballot initiatives. in a non-presidential election year, OH’s cannabis vote and abortion amendment passed with ~57% support. FL has a 60% threshold for its cannabis ballot. Floridians will need to make up the 3% delta from OH's ballot in a contentious presidential election year.
2. Assuming adult use passes, will smart policies be created and implemented in a reasonable time frame?
You made it to Base Camp, but a tough and dangerous climb is ahead. Look no further than New York, California and Canada to see what bad regulations and a slow roll out can do to your profits and ROI. Lots can and will go wrong. And bold MSOs will be investing in infrastructure prior to the November vote, further magnifying their risk.
3. Is the tough climb worth the attainable returns?
There are 20 active MSOs in market right now. Trulieve is comfortably sitting in the lead followed by peloton of ~5 firms. These 6 firms already possess ~70% of market share by revenues and stores – and growing. How much will be left for the remaining companies plus outsiders looking to jump in?
FL’s potential market is large but we know from hard experience that TAMs are never realizable.
I don’t want to be a Danny Downer. The referendum IS good news and FL has strong fundamentals. However, a wrong step with the above questions and assumptions could be dangerous.
Not every large market is worthwhile. Capital is scarce and expensive. There are many unknowns. Prudent MSOs have alternative places to deploy their cash, including back to shareholders. And FL is not the only lucrative game in town (hello Texas).
Call me to danger check your financials, strategic assumptions and plans.
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