2022 is almost here, and with it the time to look ahead towards the new opportunities and challenges it will bring. It has been an odd period, with Covid changing many growers’ plans, and it remains uncertain what the coming year will throw at the cannabis industry. Anthony Coniglio, the President of NewLake Capital, shares his predictions and expectations for the US cannabis market based on his experience within the cultivating, manufacturing, and retail company active across 9 states.
Equity investment will be limited for plant-touching businesses
The first thing Anthony expects is that equity investments in plant-touching businesses – all businesses strictly relating to the cannabis plant, such as breeding, cultivating, dispensing, and extracting – will be limited. Instead, he expects equity investors to turn towards ancillary businesses, such as marketing, legal firms, and payment processing companies. “During 2022, the timing for federal legalization is one factor that will dominate the flow of investment dollars in the sector,” he says. “Continued uncertainty around such timing will drive equity capital premiums that will be difficult for U.S. businesses to accept. As a result, we expect equity investors to be more focused on the ancillary businesses, while plant-touching companies will look to debt and sale leaseback transactions to fund their growth.”
US Senate remains balance of power
A lot of debates regarding the legalization of cannabis are held in the United States Senate. In fact, it was just a few days ago that we heard the SAFE Banking Act did not make the National Defense Authorization Act due to a lack of Senate support. Indeed, it seems that the US Senate is and will remain a huge factor in the future of the US cannabis sector. Anthony Coniglio agrees: “The Balance of power surrounding cannabis legislation has been, and continues to be, the United States Senate. I believe that, as long as Senator Schumer is the Senate Majority Leader, his sponsored legislation, the Cannabis Administration and Opportunity Act, will be the centerpiece of federal legalization efforts.” When it comes to next year, he thinks “2022 should be another year of positive steps forward but will fall short of seeing federal legalization get across the finish line.”
Industry will continue to professionalize
“The process of professionalization is expected and anticipated as the industry matures and companies evaluate the best strategy to survive long-term in this market. As we move from aggregation phase to execution phase with operators, executive leadership will be expected to execute,” Anthony shares. He adds that that is something he sees for his own company, too: “Looking back at 2021, NewLake’s biggest strength is our team’s knowledge, know-how, and relationships to win long-term in this business. It has become clear that understanding this ever-evolving and highly-dynamic industry is a competitive advantage.”