If you are a loyal reader of this blog, than you know that I always rail against limited medical marijuana programs, and the people that invest in them. Investors don't like investing in saturated markets where the barrier to entry is low. They want to land contracts in states where the barrier to entry is very large, and the licenses are very limited. Many, many investors have told me that. They feel it gives them 'an edge.' The thing that they always overlook is that just as some states program's limit the number of business licenses, so to do they limit the amount of people that can become patients, and can even limit the forms of medical cannabis that the patient can consume.
The case that I always offer up is Illinois. People were scrambling to get a medical marijuana business license in Illinois, and were only looking at the size of the population of the state, but not the details of the legislation that legalized the medical marijuana industry. Many companies forked out as much as one million dollars to compete for a license, just to now find out that 2,800 patients for the entire state does not pencil out well when these companies are crunching the numbers. The word is getting out in other states that the 'lucrative business licenses' in these limited states aren't so lucrative after all. Per Marijuana Business Daily:
Companies spent millions of dollars combined trying to win one of New York's five coveted medical marijuana business licenses, but investors aren't exactly bullish on the market's potential now that permits have been awarded.
Many institutional investors are concerned with state limits on the MMJ industry in New York, expressing concerns that each licensed company can only have four dispensaries statewide (for a grand total of 20 storefronts) and that the qualifying medical conditions list is relatively short.
"We believe it's going to be an extremely limited market," the CEO of Invest in Cannabis told the New York Business Journal.
The investment firm has 24 companies across the nation in its portfolio and is based in New York City. Yet the CEO sees the state's market potential as "pretty small because of... the amount of customers that actually have the potential to enter the market."
What these companies need to do is to not just focus on profit margins, and instead fight for reform. They think that it's lame that they can't make as much money as they had hoped. But imagine how much more it sucks to be a patient that has to go without medicine because he or she suffers from a debilitating condition that isn't covered by many states deficient medical marijuana laws. These companies should be fighting for those types of patients. Not only is it good business, it's good for the greater cause of helping people. But instead they let others fight the hard battles, then come in on the tail end when there are business opportunities and try to push everyone else out.