Connecticut Gov. Ned Lamont signed the state’s cannabis legalization bill on Tuesday. While the rollout of legal sales isn’t expected until next year, an analyst at Cantor Fitzgerald thinks Curaleaf Holdings and Green Thumb Industries will be key beneficiaries of the program.
Both companies are vertically integrated in the state, meaning they grow the cannabis and distribute it to their own medical dispensaries. Cantor Fitzgerald analyst Pablo Zuanic argues that will give both Curaleaf (ticker: CURLF) and Green Thumb (GTBIF) a leg up on the competition.
Of the 18 medical dispensaries currently operating in Connecticut, Curaleaf has four while Green Thumb has two. But of the four cultivation licenses issued, Curaleaf and Green Thumb own one each, Zuanic notes.
Starting in September, both companies will be able to apply to turn medical retail locations into hybrid stores that sell recreational cannabis. Zuanic expects recreational sales to start around mid-2022, given the license approval process and other regulatory hurdles.
New cultivation licenses will be issued through a lottery system, after a three-month application window for facilities limited to social-equity applicants. The state says half of the dispensary licenses will go to such applicants, but existing cultivators will also be able to sell weed wholesale to the recreational market if they either contribute $500,000 to the state’s Social Equity Council or provide growing space to a social-equity council.
“We believe the four existing med cultivators will grab the lion’s share of the [recreational] wholesale market initially, at least for the first couple of years,” Zuanic notes.
Such equity programs have been central to legalization efforts. Reform advocates point to the disproportionate historical impact of marijuana convictions on Black communities. Studies have shown that people of color were arrested for possession at rates over three times higher than white people despite uniform marijuana use across all demographics.
Zuanic estimates total cannabis sales in Connecticut could reach between $500 million and $600 million by the end of 2023. He also thinks recreational sales in Connecticut will light a fire under New York and New Jersey to get their programs up and running. That would leave Pennsylvania as one of the few holdouts in the region, something that could lead its legislature to move forward. Zuanic assumes Massachusetts will lose sales, since Connecticut residents will no longer need to make the trip to purchase cannabis.
“Given the busy CT highways, we think out of state buyers could also be relevant contributors,” he adds.
Both Curaleaf and Green Thumb were highlighted by Barron’s earlier this year as ways to play relaxing cannabis laws in the U.S. Curaleaf shares were up 1.8%, at $13.71, in recent trading, while Green Thumb shares were up 1.2%, at $29.74.
Write to Connor Smith at firstname.lastname@example.org