Return of the Kings: An Interview with iAnthus Capital Founders Hadley Ford and Randy Maslow, Part 2
Earlier this month, we brought you insights from the minds behind iAnthus Capital, the groundbreaking and publicly traded cannabis investment firm (ticker ITHUF). Today we’re back with more from iAnthus co-founders, CEO Hadley Ford and President Randy Maslow, as they talk about the differences between the U.S. and Canadian markets, the six states in which iAnthus currently operates, and all the fun they have in this unique sector. (And make sure to read Part 1 of our interview for the full experience of their charisma – we were spellbound!)
Now iAnthus is in six states (New York, Massachusetts, Florida, Colorado, New Mexico, and Vermont). The latest reports say that states are individually processing money from dispensaries. How does that work?
RANDY MASLOW: In most states, you can find a bank for a dispensary operation. You can usually find a regional bank that’s willing to do it. They just charge you a lot of money to bank you. There was only one institution banking cannabis operations in Florida, which is not unusual in other states as well. But they got bought by somebody else nationally and decided to let go of the cannabis banking business. Another Florida bank was set to take over all of the medical cannabis accounts, but [Attorney General] Sessions rescinded the Cole Memo, and a day later the new bank announced that they were out. So right now there’s no bank in Florida, which is a problem when most transactions are still cash transactions. But we’re confident we’ll find a solution.
Which of the markets that you’re in do you see most quickly flourishing?
HADLEY FORD: Massachusetts is going full adult recreational use in July.RM: And consumers can buy flower in Massachusetts, so larger numbers of people come out of the black market in favor of buying legal, regulated cannabis products. You can’t buy flower in some medical states like New York, Pennsylvania and Florida. This leaves a lot of even medical patients in the black market, ’cause they’re not going to change the way they’ve ingested cannabis for twenty years just to buy it legally, when consuming flower is giving them the medical relief they are seeking. The trend, however, is consumers coming over to vape pens and other derivative products, because it’s better for you and frankly its probably safer not having to combust cannabis in order to ingest it.HF: There’s a lot more variety.RM: Yeah, but a lot of guys my age aren’t going to change the way they’ve been smoking pot.HF: But you’ve changed!RM: I’ve tried both. No matter how you choose to ingest it, marijuana is so much less harmful for you than alcohol. Sorry, Hadley, this is true.HF: I like to have a drink once in awhile.RM: I’ve heard that rumor.
How do you identify what’s going to be a profitable venture among the companies that you’re looking to raise capital for?
HF: We don’t actually raise capital for the companies. We look to acquire the entire company. So if you have an entrepreneur where they’re out looking for capital, we go, “Well, you don’t have to go out looking. We’ll just acquire you and you’ll get iAnthus stock. Make some cash off the table, pocket it, amass an entire piece. If you want to stay on and run it, that’s fine. If not, we’ll hire a team to run it.” But it gives the entrepreneurs different options. This actually gives them access to money. It’s allowed us to acquire different license holders in Florida, New York and elsewhere.So we look first for large available markets, large consumer populations, states where the regulatory program is conducive to developing the market. Obviously the adult recreational use markets meet these requirements, but so do large medical markets like Florida and New York. We acquired a license in Florida that we paid almost $48 million for. We paid that much in Florida because of the large addressable market and the favorable state regulatory structure.
Obviously we know the Canadian market is leapfrogging the United States right now. The last time that you were asked about this, your estimation was that it’ll be another five years before our market looks like theirs. Is that still true?
HF: Yes. And there’s different parameters you can measure that off of – capital markets, full legalization. We’re several years behind from full legalization on a national basis, at least five years behind. That could even be seven years behind. Their legalization is full for the entire country.I think in some areas we’re ahead of them here in the US in terms of retail products and development. But Canada has developed terrific resources and leadership in cannabis cultivation. But the Canadians have largely stayed out of our market here because of the federal prohibition on cannabis. Some of these Giants of the North are these multi-billion-dollar companies that have got cash spewing out the wazoo. They have technology, they have branding, but they’re stuck at the border looking through a window going, “I can’t go into a 360-million-person market.” We mostly don’t face competition from these largest Canadian companies.
Isn’t it true that they’ll be able to start exporting to other countries soon?
HF: Yeah, but not to the United States.
Is that a cause for concern?
RM: Listen, the United States is missing out here big time. We are ceding leadership in the global cannabis market to the Canadians because cannabis is still a prohibited Schedule I substance under federal law. And it’s a Schedule 1 substance for no good reason whatsoever, in fact only for historically shameful reasons. Our government should be smarter about this. There is no reason that the U.S. should not dominate the global cannabis market. And it’s surprising to all of us in the industry that the Trump administration is letting the Canadians take the lead in capitalizing on this huge global industry. These are lost American jobs, profits and tax revenue for both the states and the federal government.HF: But it is still true that despite all this technology, all this product and IP that the Canadian licensed producers have developed, they still aren’t competing here in the U.S. with us. So iAnthus is one of just a handful of companies that gives you exposure to a market of 360 million people in the U.S. I’d argue all day long that iAnthus is still a better buy for investors in the public markets in Canada.
Aren’t the Canadian companies starting to invest in here?
HF: Yeah, a few of the larger public companies did, which had us a little worried. Then the Canadian regulatory bodies started shaking their fingers going, “Oh, we have grave concerns about these good conservative Canadians investing in this crazy thing called state-regulated cannabis in the United States.” And they actually all divested. Aphria divested, the guys in Aurora divested. They all got out of the business in the last months.RM: There are a couple of smaller Canadian companies that are still doing it, but not the larger Canadian LPs with a lot of capital.
What does the direct future look like for iAnthus?
HF: Our strategy is to acquire licenses in large addressable markets – New York, Florida, Massachusetts, and soon more. So I would expect within twelve months we’ll double our addressable market– 48 million people in those markets now, [and] hopefully we’ll add significantly to our footprint by the end of the year through our acquisition of licenses in states we find attractive.We’re publicly traded, iAnthus – ticker ITHUF, buy it at Fidelity. The basic message is that it’s a great opportunity, it’s a great market, we’re having a great time doing it.
—For more information about iAnthus, visit ianthuscapital.com, or follow them on Facebook and Twitter. The stock ticker is ITHUF, available to buy at Fidelity.Look for iAnthus in the pages of our CANNABIS print issue, now available!