Firm Cannabis Practice Chair Michael C. McQueeny, Esq. was quoted in The Lead section of New Jersey Cannabis Insider’s recent article “MSOs collapsing under COVID? Insiders remain optimistic, hopeful the industry can come out stronger”. The article begins “As the United States’ economy took a deep breath earlier this year in the face of the pandemic, it’s become more apparent how tenuous the finances were of some prominent multi-state operators.”… “Despite the financial woes hastened by the pandemic, some insiders remain hopeful for those companies able to survive the current challenges and become leaner, more competitive operations.”
The article goes on to say, “For Mike McQueeny, co-chair of Genova Burns cannabis law practice, what this means is the larger the company, the larger the fall. “I think about this in the context of some of these troubled MSOs — just because you’re a bigger company with a lot of sales doesn’t mean that you’re not leveraged to the hilt,” McQueeny said. “Ultimately, what several of these same medical and adult-use states are unfortunately finding, is that the larger the entity sometimes means the larger the fall. When balance sheets go bad, it's not just one state’s patient population that suffers, but all of them.”
“Most of these MSOs are becoming tighter on expenditures,” McQueeny said. “If you’re one of those newer startups seeking to get into the cannabis space, now is the best time to go hunting for talented partners with experience in some of these bigger MSOs, because we’ve also seen a flurry of terminations of high-ranking employees and officers within these organizations.” Sale-leaseback agreements as we’ve seen with numerous companies including Curaleaf, Acreage and Columbia Care have also proved to be a reliable solution for the short-term. “Real estate, if you own it, is one of the easiest assets to readily transfer, as the parties can provide a legally clean mechanism for ultimately receiving payments that are only indirectly tied to cannabis,” McQueeny said. “There are other inventive ways to structure lending, but from a nuts and bolts perspective, that’s the easiest mechanism to interest a lender.”
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