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Shortly after the Alabama Medical Cannabis Commission announced in June its initial list of companies that would receive a license to operate in the state, an executive with one of the companies that didn’t make the cut was driving out of Montgomery when his cell phone rang.
On the other end of the line was an executive at another cannabis company – a company that did win a license that day. The call was to see if there was any interest in purchasing that newly-acquired license.
“It was unbelievable that it was so bold and so quick,” said the cannabis company executive, who provided the information on condition of anonymity. The executive also declined to provide the name of the caller, because, he said, at some point his company might want to make that deal.
That deal never progressed, because a few days later, a Montgomery County Circuit Court judge put in place a restraining order, bringing the issuing of licenses to a halt, and shortly thereafter the AMCC announced that it was voiding those licenses and starting again.
Still, the alleged offer brings to light an issue that has long lingered just in the background of the AMCC’s licensing process – is it possible for companies that are approved for a license to make a quick buck (or bunch of bucks) from selling that license to one of its cash-rich national cannabis companies?
The short answer appears to be … maybe.
There is a provision within Alabama’s medical cannabis law that prohibits simply selling a license. In order for a licensed cannabis company to transfer its license to another company, the licensee and potential buyer would have to seek approval from the AMCC first.
That section of law also prohibits selling or transferring more than 35-percent of stock or controlling rights in a licensed cannabis company. Such a transfer must also be approved by the AMCC.
That would seem to at least make the prospect of license swapping extremely unlikely, but attorneys who represent cannabis companies said the provisions are not that difficult to circumvent in most cases.
“The bottom line is that it can be done and there’s really no law that can stop it,” said one company’s attorney, who spoke on condition of anonymity. “It’s complicated, and the exact process would depend on the situation and what the companies are trying to accomplish. It likely wouldn’t be an outright sale, but a process where certain percentages of a company are moved in several transactions.”
But even without jumping through the loopholes, the transfers can still take place with AMCC approval. If an agreement is made between a company that finishes in the top five and a company wishing to purchase that license that finished relatively highly in the scoring, the attorneys who spoke with APR believe such a deal would likely be approved.
Fueling the speculation that such transfers of licenses might occur is the reality of the cannabis market, which has been a hotbed of mergers and acquisitions over the last two years. Acquisition deals worth hundreds of millions of dollars are almost routine within the industry.
That is particularly true in Florida – the state Alabama chose as its cannabis role model – where between late-2020 and early 2023, there have been at least a dozen high-dollar acquisitions. That includes Verano and Trulieve – two behemoths in the national cannabis industry – who spent more than $3 billion combined to take over smaller, Florida-based companies.
Also adding to the speculation in Alabama is the fact that several applicants for licenses mysteriously list addresses on business licenses that were shared with other applicants. For example, Verano and Gulf Shores Holdings share a Montgomery address, as does TheraTrue, CCS of Alabama and RJK Holdings.
