A company already drawing scrutiny in Florida for potentially holding a stake in multiple medical cannabis businesses drew similar interest from Massachusetts regulators. Now a high-priced acquisition could hinge on how Florida handles its own licensing rules.
Purchases in both Florida and Massachusetts involve the hedge fund Gotham Green Partners. That business last year made a play to purchase most shares of iAnthus, another fund with a heavy stake in the industry. But that’s a deal iAnthus now wants nixed, with iAnthus and Gotham on different sides of a lawsuit last month in a Canadian court over details of the restructuring deal, according to the trade publication GreenMarketReport. Gotham sued iAnthus demanding more time to finalize the arrangement.
The Gotham deal, though, means a significant purchase in Florida. Because iAnthus owns GrowHealthy, one of 22 medical marijuana businesses licensed to operate in Florida, that would give control of a player in a tightly regulated industry to Gotham, which already owns a stake in MedMen, another licensed cannabis company operating in Florida.
But Florida law forbids the same entity it it owns 5% or of one cannabis license holder from owning any stake in another, as the Tampa Bay Times noted in July. That has the industry’s attention already turning toward the state Department of Health to see what decision gets made about the purchase. Still, in the short history of legal marijuana enterprise in Florida, the state has never denied such a license transfer and many question if it will do so now.
Just as this issue plays out in Tallahassee, another state has started its own investigation of Gotham, according to the Boston Business Journal. The Massachusetts Cannabis Control Commission earlier this year already signed off on the Gotham acquisition of iAnthus, which owns three marijuana licenses in the Bay State. But iAnthus, as it sought to nullify a takeover, alleged in court documents in Massachusetts that Gotham had concealed the number of licenses it had stake in within the state, including its interest in MM Enterprises, another company operating in Massachusetts as the parent of MedMen Boston. Massachusetts law prohibits a company having a stake in three or more licenses for cannabis businesses in the state.
That has Massachusetts now investigating the legality of the acquisition.
If deals unravel in two states, it could have international ramifications and impact the court case between iAnthus and Gotham in Ontario Superior Court.
Or it could be remedied in other deals. For example, Canada-based Tilray in August acquired a hefty stake in MedMen from Gotham in a $166-million-dollar deal, according to CNBC. But that’s for a minority stake in the company and the deal remains subject to regulatory approvals in the U.S.
But it raises the significance of a Department of Health decision in Florida on what has become a fairly routine process of transferring licenses with acquisitions.