Recreational Marijuana Pushes the Value of Marijuana Licenses Even Higher

How much is a marijuana license worth? For anyone who wants to get into the business of growing, processing, or dispensing marijuana, a license could be worth millions of dollars. In fact, marijuana license sales in 2017 show their value keeps getting even higher. As a result, license holders in states where legalization of recreational marijuana has already happened or might happen in the near future are often waiting to sell to the highest bidder.

Consider what’s happening in California. Four out of 14 marijuana dispensaries in Santa Cruz County, California were sold in the past year. That’s nearly 30% of dispensary licenses changing hands for large sums of money. Dispensary owners who paid $125,000 for their licenses several years ago are now selling them for up to $2.4 million.

The sales rush isn’t just happening in Santa Cruz County. Other license holders in California are getting multiple offers, and these offers don’t always include the license holders’ businesses. Many times, inquiries come from investors who just want the license and nothing else.

The growing value of marijuana licenses is happening across the country. In 2016, multiple licenses changed hands in Colorado with prices as high as $4.5 million. Similar value is being placed on licenses in Nevada. In March of this year, Canada’s Golden Leaf Holdings purchased Nevada cultivation and extraction licenses from NevWa (which operates as Grassroots) for nearly $2 million.

Buying licenses and acquiring businesses in order to get the licenses they hold is becoming a common practice in the marijuana industry. In 2017, Canadian companies have spent tens of millions of dollars acquiring a variety of marijuana-related businesses in Nevada, Arizona, Florida, New York, and Maryland. In all cases, the real value was in the marijuana licenses.

All Signs Point to Sustained Demand for Marijuana Licenses

Based on recent trends, it seems that the demand for marijuana licenses will be sustained for the foreseeable future and prices will continue to rise. There are two primary reasons for this trend:

1. Market Size Continues to Grow

Some of the largest potential markets in the United States are just starting to open up to the medical marijuana industry. Most importantly, Florida is making changes to its medical marijuana laws that should open the doors to more sales and greater market penetration.

Furthermore, as more states increase the number of conditions that qualify for medical marijuana and decrease the barriers to obtaining that medical marijuana (e.g., by increasing the number of dispensary licenses and making it easier for doctors to recommend medical marijuana), the market will grow across the country. As demand increases, so will the value of a marijuana license.

2. Recreational Laws are Changing

The value of a medical marijuana license grows exponentially if a state has already approved recreational marijuana or is expected to do so in the future. Many states that legalize recreational marijuana in some form will automatically give adult-use licenses to businesses that already hold medical marijuana licenses, or they might give those license holders priority access to adult-use licenses.

Either way, having a medical marijuana license in a state that might approve recreational marijuana in the future gives the license holder instant access to an exponentially larger market when the laws change. There is no doubt that a license in a state poised to approve recreational marijuana holds significant potential value.

The Changing Landscape of the Marijuana Industry

As the marijuana industry matures and more states approve recreational marijuana, larger companies want to get in. They have the deep pockets to buy marijuana licenses and businesses. Does this mean smaller businesses will be forced out in time? No, but the marijuana industry of 2020 will look very different from the marijuana industry today based on the number of high-priced license purchases and acquisitions that have been happening during the past 12 months.

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