After experiencing a rolling open market, Oregon finally raised the walls in its cannabis program earlier this year. Typically, there are two broad ways a state might sequester a regulated cannabis program, idle trade clause issues though. The first is the enactment of residency requirements for ownership of a marijuana business. Oregon got rid of these in 2016. The second is to cap the range of licenses available.
Oregon chose the second track early last month, when it approved the license application endowment Retroactive to January 1, 2022, and extended to March 31, 2024. This blog is intended for people unfamiliar with the Oregon market. It gives a high-level overview of how entry works in the context of this new endowment.
You have to buy your way to the regulated cannabis market in Oregon
There is no way to obtain a new marijuana license from the Oregon Liquor and Cannabis Commission (OLCC) directly from the commission, with one possible exception. I will discuss that in the next section. Instead, you have to look for another licensee who is willing to sell. In this case, OLCC will work with the seller to “waiver” its license in favor of an alternative license for marijuana of the same type, issued to the buyer. We have been dealing with these sales for years. They often take the form of an asset purchase agreement and there is some art to this process.
Prior to the current moratorium, a more limited moratorium existed only in the producer licenses category. Too many of these licenses have changed since 2018 or so, with prices floating in $200,000 – $250,000. We haven’t seen any movement in this price after the 2022 moratorium, but it’s still too early and market factors may inform the analysis – starting with the fact that wholesale flower prices seem lower in Oregon. from any other country.
Prior to this year, we also had a large number of deals on other classes of licenses and businesses, in part due to OLCC. Paused accept the talisman’s request; But also because OLCC was very slow to process the applications that led up to that point and for quite some time after that. These deals tend to be priced differently from the producers’ sales. With retailers, for example, parties tend to allocate little value to the license itself. Instead, the price was usually related revenue multipliers. However, over the past few years, more sophisticated buyers have been pricing stores (and other continuing interests) using adjusted EBITDA and other ownership models.
Now that a cap on the number of retail licensors has been set in Oregon, we may see these licenses change for a higher secondary market buildup. I think this would also be true for wholesalers and processors to a lesser extent. We only have a few of these sales going on right now in the office and again, it’s early.
Another way in the regulated cannabis market in Oregon? Marijuana License Reset Program
Last month, my colleague Jesse Mondry Wrote an excellent post about this newly envisioned alternative entry point. you can find it here. In short, the Legislature and the OLCC have made a vague nod to social justice through the possibility of the “marijuana license appropriation program” succinctly described in House Bill 4016.
Do we know who would constitute a “qualified applicant” under this new marijuana license reassignment program? no. In fact, we don’t even know if the software will take root or not. HB 4016 provides only that OLCC “may” create this software, and does not give any timeline for OLCC to make a decision.
Anyone who deals with OLCC regularly recognizes that the committee is well-intentioned but overworked, understaffed, and more reactive than proactive in nature. However, I believe that the OLCC will eventually find a way to bring in social justice applicants – and possibly other deserving candidates – under the reassignment program. I say this not only because the OLCC is currently undergoing a stock audit from the Secretary of State, but because it appears to be the right thing to do.
If and when the license reset program is launched, it will likely be limited to a separate number of licenses for a limited set of candidates. Right now, everyone outside of Oregon’s marijuana program is in the same boat, from Hemp MSOs to Victims of the war on drugs. Everyone has to buy their way. We all know who he prefers.