Navigating the Ever-Changing Waters of Florida’s MMTC License Acquisitions

“How much money do I need to buy a Florida Medical Marijuana Treatment Center license?”

I am asked this question often. My response, true to my legal profession, is invariably, “It depends.” Years navigating MMTC transactions have taught me that prices fluctuate significantly due to various factors, including economic conditions and transaction-specific circumstances.

Understanding cannabis license pricing begins with Economics 101: supply and demand.

Supply:? We currently have 25 licensed MMTCs in Florida, with about 20 of them actively operating.? Florida is a vertically integrated market, meaning MMTCs must grow, process, and sell their own products.? There is no limit on the size or number of facilities a MMTC may open.? There are currently 625 brick and mortar dispensing facilities in Florida, and many MMTCs also offer delivery.?

Florida also has an abundance of non-MMTC sellers of intoxicating cannabis-derived products like Delta-8.? This may be changing this year, though, as the Florida legislature recently passed a ban on these products, which will become effective in October if it is signed by the Governor.? We could see an uptick in qualified patients who turn to MMTCs at that time.

Demand: We currently have about 876,346 active qualified patients in Florida.? This number has continued to grow steadily.

Two significant developments could reshape the landscape in the near future:

First, at least 22 additional MMTC licenses are expected to be awarded (or at least the intended awards announced) this year.? The Office of Medical Marijuana Use is still in the process of scoring applications submitted in April of 2023, with outcomes expected at any time.? We may also see additional licenses awarded to previous Pigford applicants (a separate application process that took place in March of 2022, where the applicant pool was limited to only recognized class members of?Pigford v. Glickman, 185 F.R.D. 82 (D.D.C. 1999) and recognized class members of?In re Black Farmers Litigation, 856 F. Supp. 2d 1 (D.D.C. 2011) – the Florida legislature recently passed legislation that may allow some of those applicants to cure deficiencies in their applications).??

Second, Florida could soon become an adult use state. We are anxiously awaiting a ruling from the Florida Supreme Court on a proposed adult-use amendment to the Florida Constitution. The amendment aims to legalize marijuana use for adults over 21 and is pending approval for inclusion on the November 2024 ballot. The Court’s decision, which is expected to be issued before April 1, will determine if the initiative meets the requirements to appear on the ballot. If it does, the initiative must receive the support of 60% of Florida voters to take effect.

It has been estimated that medical marijuana sales in Florida will be over $2 billion this year, and that adult use sales could be over $6 billion.

What are some other factors that could impact license value that are unique to the particular transaction?

Payment terms: The structure—be it upfront cash, installments, or stock—can greatly influence transaction dynamics.

Timing: Historical rushes to sell licenses, such as in 2019 when 8 licenses were issued at once, underscore the competitive frenzy that can arise, highlighting the importance of strategic early negotiations.? (One strategy we have used successfully in the past is negotiating a conditional deal before the license is even granted to get ahead of the game.)

Knowledge and preparation: In-depth understanding of the regulatory landscape and proactive preparation for ownership changes are critical to avoiding transactional pitfalls. You don’t want your deal to fall apart because you couldn’t get the required regulatory approvals in time.

Being a jerk: Don’t underestimate this one.? I have seen both buyers and sellers get left in the dust by being dishonest during the negotiation process, or even for just being disorganized or taking an unreasonable amount of time to make decisions or return phone calls or e-mails during critical time periods. Unethical or disorganized practices tarnish reputations, hindering future transactions.

Predicting the value of an MMTC license is akin to stock market forecasts: informed guesses are possible, but the focus should primarily be on positioning oneself advantageously in the market now.