Verano: How To Succeed In U.S. Cannabis

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Aaron Miles: You know, we don’t run the business based off dislocations in the equity market, right? We’re building this business for long term growth. Fundamentals at some point will reflect — our stock prices simply reflect the fundamentals of the business. And I think when you talk to shareholders, it’s — we can’t hide from having meetings. I mean, I talk to some shareholders on a weekly basis.

Rena Sherbill: Hi again, everybody. Welcome back to the show. Great to have you listening with us. As always, today, I’m excited to bring you my conversation with Aaron Miles, Chief Investment Officer at Verano (OTCQX:VRNOF), a multi-state operator that we’ve talked about many times on the show, talked about by many analysts. It’s touted by many as one of their top cannabis stocks. Seeking Alpha authors rate it as a strong buy. Wall Street analysts rate it as a strong buy. Our quant system rates it as a hold.

We talk about that in the interview with Aaron. Aaron gives us a lot of great insights into what is making Verano one of the favorites of the cannabis MSOs and how it is growing, and growing at scale at that. So excited to get into it with Aaron. Hope you enjoy this conversation.

We have two episodes coming this week. Another one is dropping on Thursday with Chris Beals, the CEO of Weedmaps (MAPS), otherwise known as WM Technology. Next week, we have Raymond Chang from Agrify and Matt Hawkins from Harborside and Entourage Effect Capital. All these conversations I had at Benzinga. A lot of great insights, a lot of great takeaways. Hope you enjoy it.

All right, Aaron, welcome to The Cannabis Investing Podcast. Super happy to have you on.

AM: Thank you so much for having me. It’s a pleasure to be here. And I appreciate the time today.

RS: So I was excited to talk to you because I’m excited to talk to Verano. It’s one of the companies that we’ve been talking a lot on the podcast. I would say, it’s one of the companies that when people come on and talk about, a great MSO, that you may not be invested in, a great MSO that you may not have heard of, one of the big five, but not one of the ones that people frequently know about it, unless you’re really kind of following the industry as an investor or kind of see what’s coming up.

How would you discuss — as the Chief Investment Officer particularly, how would you summarize Verano’s place in the ecosystem? And maybe even why you chose to connect with Verano in the first place?

AM: Sure, it’s obviously something I’ve been working on for two years, is trying to gain relevancy in light of a very infant, but in cannabis, a very mature market. And so kind of give you a quick background on me. I was actually at Cresco Labs (OTCQX:CRLBF) in 2018, and helped take them public. And Cresco is a monster in the space. Once they get the Columbia Care (OTCQX:CCHWF) deal done from a numbers perspective they’ll be the largest. When I met George Arcos, I saw the operator mindset that he used to build Verano. And so Verano was a private company. I knew them, but I just knew them as a competitor in the State of Illinois. I didn’t really understand what Verano was trying to accomplish.

And so what — initially met with George. He’s like, we want you to come here, and help us, not only go public, but now we’re fighting for dollars in a market where there’s not a lot of new dollars that are coming in. So the challenge behind what we had to accomplish is we’re all pitching the same story, the best footprint, the best product, the most efficient operator. So how do we go out there and tell everybody the same story, but actually improve it in a very consolidated time.

So the challenge for me was going public in general, the administrative aspects of that is a challenge. And so when you go through that, we had to do it during COVID. So let’s not under — undervalue the amount of the going public nature and being in person, how much it actually helps.

The Verano story is a very simple one. George has an operator mindset. Verano licensed in 2014. And is basically one of the only operators in the space that can say, given my background running businesses, I took my construction team and real estate team down to Southern Illinois. We built out our facility there, and it was really off to the races where George knew he could make money in this space.

So while a lot of companies were investing at the time of inception to become profitable down the line, George knew he could be profitable from day one. And so to be able to leverage cash flow, to build out our footprint, which we’ve done, that helped us avoid sale leaseback, that’s helped us to be more conservative on the capital raising side, and it gave us some optionality on when we wanted to actually go public. So February of last year is when we initially came into the public markets.

And from there, it’s been an acceleration of really just gaining relevancy. It’s going public. We did two equity deals, we did two amendments to our debt deal, 16 acquisitions, we’ve now closed 15 of those. We had a lock up schedule that we had to get it passed. And this is all virtual, and it’s all when we’re trying to gain relevancy in the space. So I’ve been able to really leverage a lot of my relationships. And we’re a company that’s like — look, we’re going to talk about how great we are. Everyone’s going to put out the marketing materials. We want to show you. And I think, when you actually — you’ll hear the quality of product and the quality of operations that we have, that’s reflected in our numbers. And that’s reflected in our industry in the margin profile.

RS: So let me ask you something because, to your point of how to remain or even become a strong operator in this space, it’s salient that you understand the types of leases that you’re signing, what types of deals you’re getting done. I was just talking to somebody briefly about who is going to be the ones to survive this industry, right? It looks like it’s not going to be very many. And I would say the people that can grow good flower, the people that have a really strong strategy, the people that have really sound, fiscal operations. I would say, if you don’t have those, you’re for sure not going to make it. And even if you do have those, you still might not make it.

And talking about as these different states are coming online and expanding the strategy. And I would also say that even the stronger operators have maybe one or two or maybe even three states, and then as they start to expand and scale, I would say some of those companies don’t survive that scaling. So how are you all looking at this growth and the scaling as you move on to different states, as you expand from a private to a public, and then do all the things necessary for a public company, as you expand, along with maintaining true to shareholders? How do you look at that and strategize for that?

AM: Yeah, it’s something that we focus on every day. And I’ll tell you this, the challenge that we face as an industry, not just Verano alone, is maneuvering and being flexible as a business because, like look at New Jersey, you don’t know when states are going to turn on. So how do you invest in headcount and the appropriate cultivation facility in a market when we had seven days notice, of when that was going to turn on? And we had an idea, but like, how do you invest appropriately and build your business? So yes, you hit on a quality flower, but it’s not just quality flower, it’s quality flower at scale, and it’s in every single state that you operate in.

When we get Goodness Growth (OTCQX:GDNSF) closed, we’re going to have 17 states, 16 active operations. We can’t ship out of our LVM facility into all these other markets. And that’s going to give us consistency of flower and availability of flower. So having the operator mindset that George does, he knows every single square inch of our facilities. We are focused on making sure that we’re continually fine tuning our operations, because what’s going to set us apart is availability of product, consistency of product and pricing.

And so you look at certain dynamics that we’ve had to face, like COVID, for instance. You have now a potential recession in the horizon. You have supply chain disruptions, and you have to adjust your business to make sure that you’re maintaining your margin profile. And so a company like Verano, we’ve been probably tops in the industry of being able to adjust and invest ahead of growth, but not too far ahead. Because a lot of companies have invested so far ahead, where the margins have been compressing or waiting for that profitability to come, we’ve been able to adjust our business in light of that.

So I can tell you having the hospitality operational mindset that we do as a business, you’re going to go to Maryland, and you’re going to get this dispensary out and have the same experience if you were to come into Illinois, right? Like there’s a reason Starbucks is so successful, because cold brew tastes the same on the East Coast as it does on the West Coast, and the feel of Starbucks is going to be very consistent, and you want your customers to expect that from your company.

Now the challenge is Starbucks (SBUX) can do that on large scale, we have to do it by state by state. So we’re technically running 16 separate businesses. And we have to give you the same experience in all of those markets. So that’s where operations come in and they’re so key because of how important it is to create that consistency across the border. So we’re focused on maneuvering the business in light of new opportunities, and also in light of potential disruptions. Pricing has definitely been an area that we focused on, which is why we’ve accelerated some of our product launches. So we launched an Essence line which is a mid-tier, we launched Savvy, which is a value brand. And the key to this is that it’s the same genetics as our premium what we consider to be the top flower in the space. So we’re now offering varieties to our customers because the market is demanding it.

So we’re not trying to predict too far ahead what the market wants. We’re listening, and we’re reacting accordingly. And that’s again when you look at the margins, and the cash flow that we’re able to put up, there’s a reason we run as efficiently as we do.

RS: So let me ask you, speaking to the brand rollout, it sounds like that’s one prong of a strategy, like looking to capture the market. How do you accelerate that rollout? What does that look like? That’s like, okay, now we want — this is the kind of a lever to pull that we can use in this market, this makes the most sense. Is it put more focus? Is it changing priorities of teams? How does that — how do you kind of arrive at that decision?

AM: It starts at the — well, first of all, you have to have a game plan, right? And so I want to be clear on this. It’s not like we just sit and wait and then the market says we want a mid-tier product, and then we develop one. And so you have a plan. Like we were always going to roll out a mid-tier and a value brand, right. And we just had to accelerate that. So the plan is, how do you pivot? And then how do you become basically market ready with these products? And so it all starts with the cultivation facilities? And you have to have a game plan around that? And why can you charge less for an Essence brand than you do your premium, when it’s really the same genetics in the same plant?

Well, it’s also about automation. And it’s also about how you — basically from seed to sale, how do you maintain more efficiency behind the cost associated to get into the final product. And so again, when you think about being able to invest, and sell, fund CapEx, that has given us the ability to really focus in on automation. So now we have different tiers, right. So your premium is going to be hand trimmed, and you’re going to burp your plants, two, three times a day and cure it for 30 days. And it’s going to be that really fine product that is very much just tended to. But there’s costs associated with that.

And so now you look at Essence, and you’re going to have, maybe not as much attention from a human perspective, but then you’re going to have more automation behind how you’re going to produce the product. And then you got your value brand, which is basically pure automation. There’s not a lot of tending to the plants. I mean, obviously, you do the base maintenance, but then you’re running this through a Mobius machine, or you’re running it through like automated trimmers instead of hand trimming.

So it’s like, how do you balance what you’re investing in from an automation perspective to the fine premium product, and we were ready to go. So we had a plan operationally, we had a plan — a plan from a branding perspective, and then we have the roadmap for how we actually see the market developing. When we play those cards that’s what the market is going to dictate. But we got dinged when we went public because obviously, we were a disruptor in the space and coming in and saying we’re a Tier 1. And there was always the big four, where we came in.

People wanted to pick apart our story. And I think one of the big things that people looked at was the branding and the marketing. And they were like, well, Verano is very base level. Well, guess what, back in 2017 we could put our stuff in a shoe box and break jeepers [ph] on it and sell it if it was good enough product. And now we’re getting to a point where like, again, we had a marketing and branding strategy, that we’re now figuring out when we want to accelerate that or play those cards. So you just have to have a plan, and in the timing. I would love to know, because like, tell me what the market is going to look like in five years.

Like, tell me what states are going to be rec, tell me what pricing is going to be or, you know, if you really don’t know, you have ideas, so you have to have a variety of plans and strategies in place. And then when the market goes in a certain direction, then you know what areas that need focusing on.

RS: Yeah, I would say anybody doing predicting in this industry has not done a fantastic job because it’s just there’s so many variables, so many different changes, so many obstacles that get thrown at you. So here’s a kind of a question about like, the Goodness Growth deal. A, were you looking around at partner or outfits to partner up with for a while? B, how did you land on Goodness Growth? And C, just curious about how you’re talking about strategizing and planning for things? How are you all talking about the integration between Goodness Growth and Verano?

AM: Yeah. So when there’s a deal that’s out there, right, like massive deals like a Columbia Care, these bankers, it’s a very incestuous world that we that we operate in. So you know the assets that are available, right. And for us, it was — we always wanted to be in New York. And when do you play that card and when do you execute on a deal? We took a wait and see approach. And we wanted to not invest in New York, have to sit on an investment when we can invest in other states and get more near term return on invested capital.

So that’s another area that I think we really excelled at is investing our dollars at the right time to make sure that we’re maximizing shareholder wealth, and the New York deal was — is — it falls completely in line with that strategy. And in 2018, we looked at stuff, 2019 we looked at stuff 2020, there was a lot of companies that made plays in 2018, because Cuomo at the time was going to roll in adult use into his April budget in 2019. And then it was going to be, rec was going to turn on later in the year, and then New York was going to be this fantastic market.

Well, fast forward till now, it’s kind of a disrupted market people don’t understand, the bodega is in the hemp farmers growing outdoors, and then two, social equity dispensaries, we wanted to wait to see how the market played out. And we also wanted to wait to see if there was availability to go in from a licensing perspective, because like New Jersey, for instance, and then I’m going to pivot back to business growth, that’s a home run for us. That’s an organic win, we won the license. We were able to build out our assets the way that we wanted from day one.

New York was a little different. So when we saw that was going to be more of a social equity focus, we knew that we had to execute on a deal. And so we know the Goodness Growth team extremely well. I mean, there’s only 10 assets that are available in the states from a vertically integrated perspective. And we know every single asset and so we looked to see what the availability was. And we also look to see what we wanted to accomplish out of this deal.

So of course, you want to establish a New York footprint. But could we layer on other states through one acquisition, because when I talked about doing 16 acquisitions, and we closed 15, there’s a lot of bandwidth if it’s a single dispensary to an ultimate type deal, right. And so when you can execute on a deal and get multiple assets, that’s also a benefit. So Goodness Growth we know Kyle and the team extremely well. They’ve built a very strong presence in Minnesota, because that’s where the company is based.

So Goodness Growth gave us not only a New York asset, or will give us not only a New York asset, but it also gives us one of two vertically integrated licenses in Minnesota. Six million people, infant market, starting to develop. Flower edibles are going to start to ramp up. And so to be able to have a first mover advantage potential in a State like Minnesota was also extremely attractive for us from the business growth perspective.

So we wanted to execute on a deal from an integration perspective and I’m not downplaying the amount of work that’s going to need to be done. But again we’ve closed on 15 deals. And so we’ve kind of been through this now. And so we have a blueprint and a roadmap to really how we want to get this integrated, and kind of what we’re going to be looking for. And there’s only so much we can do early on, before we get the deal closed, and actually control the asset. But companies do communicate. And I think Goodness Growth knows what we want the asset to look like, as we would integrate it into your overall portfolio.

RS: Speaking of trying to control as much as you can, but knowing that there’s going to be the inevitable, uncontrollable factor, what are your thoughts on the New York rollout? And you can talk about New Jersey as well, but I’m curious how or if you’re feeling disappointed by kind of — I know that there’s some good reasons for the delay, but still, there’s a big delay, and it’s kind of, I would say, encouraging the illicit market to grow even bigger, as the legal market isn’t yet allowed to grow.

AM: Yeah, I would say, New York is going to be a market now. And I’m careful to say this, but I’ll say it anyways, is that it’s going to be a market that probably has to fail before it succeeds. And New York under the the FOMO regime, I think was going to be a little bit more focused on how do you compete against the illicit market. And I think where the mindset is at now, and this is rightfully so because they want to be more social equity focused, and they want to make sure that they’re balancing the opportunities for everyone across the board.

But what they don’t understand is when you’re putting — if you look at a first time hemp farmer outdoor in New York, now we go back to what we just talked about consistency of product availability, pricing. I mean, I can go to Manhattan and order a vape [ph], and it gets delivered to my hotel room in 30 minutes. And it’s like high quality California product that’s getting shipped into the market, how do you compete against that? And I know people — the regulators want to be fair, but like the 10 vertically integrated operators in the state, like they need us, right?

Like we are the scale, and we are the ones that can come together and provide product across the state, and then start to give incentive for that illicit market to transition over to the legal market. And so it’s frustrating because you want things to accelerate more, but this is the cannabis world we operate in. I mean look at Jersey, we were ready for an August rollout in ’21, then it was February, then it was March. And then again, you get seven days to roll out a program and it’s like we’re ready. You plan for the worst.

It’s like — and you’re just, pleased when something happens. And I think New York will be one of those markets where — when these rollout happens, and these operators start to understand like why aren’t there more dollars going into the legal market, that’s when we can come in as an industry and say, let’s look at what happened in Jersey, let’s look what happened in Illinois. And look what’s happening in California. I mean, to a certain extent like California — California, New York are very similar, just from an illicit market perspective. California has a lot more growing going on than New York. But in reality, they’re very well oiled machines in from an illicit market perspective.

So you have to give regulators the incentive behind allowing us to really ramp up our footprint. But it’ll be a challenge, and we’ll be ready. But again, we anticipate closing business growth by the end of the year, once we get control of that asset that we can really start to ramp up the build out second cultivation facility, get the dispensaries online. So it gives us time to get game ready, when the larger MSOs are able to participate.

And then lastly, I’m going to say here too is — and I know we’re probably going to touch on this a little bit is, I think there’s been a stigma put out there from a political perspective, where it’s like, you have the big bad MSOs. And then you have the small players that are being impacted by the big bad MSOs. And what I don’t think regulators fully understand is we want everyone to succeed. When there’s 200 additional dispensaries opened, those are 200 additional shelves that we can sell into. We partner and play nice in the sandbox, like we want everyone to succeed in this industry.

We want cannabis, the tide to raise all ships. We don’t want anyone to fail on this space, because that could impact the overall industry itself. And so we’re really working with regulators to understand that if you get a SAFE Act passed, like you’re not helping us. You’re actually helping the smaller player more than you’re helping us, like we don’t need SAFE to pass. The longer it takes, the stronger we become. And then licensing that you’re needing Alpha social equity participants, big operators to come in and vitals for pennies on the dollar, they run out of money.

So like there’s a lot of incentive for the government to come in and pass the SAFE, allow MSOs to really establish their footprint, because we can be very helpful in helping on that social equity front as well.

RS: Yeah, it’s interesting. I mean, I think in general, like once labels get attached to something, watch out. And I think just because there’s more money, just because it’s typically people coming from — and that half of them are coming from a finance background that already denigrated if you’re coming into the cannabis world and the legacy growers versus people coming in now. But I was also just talking about this with someone this morning is, these big, bad MSOs are the ones that are keeping this industry afloat, like whether we like it or not.

And honestly, the government is just making the chasm even greater between the big and the small, and making it nearly impossible to make it as a small person without the help of a bigger outfit, because of the onerous taxation, because of the multiple challenges and ever changing obstacles. And so yeah, I think we would all do well to kind of look closer at how the industry looks, who is benefiting from things taking a longer time.

I think that people that are quick to throw labels, just because something looks like it is, often I think in this industry, wrong. At the same time, I also understand why people are upset and looking to denigrate. Because if you’re invested in this industry, you’re not having a fun time for the past year plus, and people are looking to lay blame and looking for reasons to kind of cast aspersions into the industry at large. So I would ask you, I guess, how do you talk to shareholders in this — as you’re growing as you’re expanding, as you’re scaling, and as it’s not being reflected in the share price?

You’re obviously not alone in that, but there’s huge just price swings and price declines. How are you thinking about that and navigating kind of the shareholder community?

AM: Yeah, you know it is, it’s when — so first of all on our Q1 call, we were really quick to highlight that we don’t run the business based off dislocations in the equity market, right like we’re building this business for long term growth. Fundamentals, at some point will reflect — our stock prices simply reflect the fundamentals of the business. And I think when you talk to shareholders, it’s — we can’t hide from having meetings.

I mean, I talk to some shareholders on a weekly basis, like I’ve been in capital markets for over 20 years. And at a minimum, at max it was used to be like once a quarter, and you just have to make yourself available first and foremost. And you have to make sure that even in times of imbalance, you have to then double down and get more aggressive on your marketing.

So when we talk to shareholders, it’s highlighting the playbook for how we see the industry evolving. And then you have this list of like the growth drivers, right like if you think about it over the last two years, the best news we’ve had has been New Jersey turned up. Outside of that it’s like you’ve had pricing decompression, you’ve had COVID, you’ve had supply chain disruptions, you’ve had recession, like this stuff isn’t going to last forever.

So it’s going out and talking to shareholders and making sure that they understand that, when you see all these growth drivers if SAFE passes, and we get uplisted, and we get credit facilities, and federal banking and credit cards, and Connecticut and New York and Maryland, Ohio and all these states that we operate in, turn adult use, and we can really maximize the efficiencies of the business, and our stock is trading where it’s trading at, then panic. But until we actually start getting to some of those aspects of the industry, we have a long way to go. And I know it’s frustrating.

And I know a lot of people are — they want this. Back in 2017 2016, when a lot of people were investing in the private companies, they looked at this, like a golden ticket, like and it could have been. You get to 2018 when a lot of companies went public. And then if the government passed SAFE, and I mean — there would have been a massive amount of inflows of dollars. And so I think it’s just keeping people focused on where the growth drivers are kind of going to come from, and then having them actually understand what the benefits of SAFE actually could be. Because we still don’t know, there’s no definition for what SAFE is. Is it just a federal bank account and credit cards or can we up list, right?

Like I worked on the New York Stock Exchange. And I can tell you just even uplisting, and having a Citadel as a designated market maker overseeing your stock now starts to smooth out those imbalances. It tightens the bid-ask spread. Those last 10 minutes that we see trade every day, it creates guardrails around that. So to be able to utilize the efficiencies of the U.S. capital markets and get massive amounts of dollars from institutions coming in, I don’t think people will really understand how big of a boom that actually is.

But now you’re looking at it. You have to invest now, and we have uncertain timing. And so you have to have the patience to be able to either double down and dollar cost average down as the market trades down. Or this might just not be the industry for you. There’s a ton of volatility and the growth potential is massive ahead of us. But the last thing I’ll say too is we’re quick to point out and it’s never — I feel sorry for us type of scenario, but like we’ve invested our lives in this. So there’s like funds that like heavy portion invested in cannabis, like we’re fighting on a daily basis, because we’ve invested our careers and our lives into the space as well. And so we wouldn’t be here if we didn’t see the growth potential bottom line.

RS: Yeah, it’s funny. I think that it’s not for every investor. And it’s certainly not for every person to — even somebody that’s a great leader of a company, not necessarily in cannabis, because of what you’re saying. There’s so many things happening that don’t happen in a normal industry. And to your point if you look on the Verano stock page, on Seeking Alpha, there’s a buy from Wall Street analysts, there’s a buy from authors on Seeking Alpha. According to our own Quant rating system, the hold of a buy would be the momentum, which is what you’re speaking to.

So in terms of that momentum, looking at that momentum, do you think it’s institutional capital coming in, which I would imagine comes after a series of maybe uplisting, maybe Safe Banking? Is it kind of that gradual evolution until we get to institutional capital being allowed to invest? Is that how you see it kind of returning to a more equal footing that the price is reflective more of the fundamentals?

AM: I think that’s fair. I mean, and let me be upfront on this, like if I had to pick between uplisting or institutional dollars coming in, I would pick institutional dollars all day long.

RS: They are private aided on each other at all?

AM: Oh, absolutely. Yeah, I think but now, I guess here’s the difference. Like, I’ve talked to some very large institutions, where they’re like — our compliance department will have comfort, if SAFE passes in any form, and then they can invest in the next day, right. And then you look at the exchanges, and where’s the concern for the exchanges, it’s anti-money laundering. So it’s going to have to be a SAFE passage and then a plus, right. There’s going to have to be some anti-money laundering provisions where the exchanges because — there’s zero risk, because there’s nothing in the bylaws right now in either the NASDAQ or the NYSE that say they can’t list us. They’re choosing not to list us.

So when we talk to the exchanges, they’re both doing their homework. And so I think when SAFE passes, yes, they’re both predicated on each other, but I think institutional dollars come in much faster than us being able to uplist, because then once it’s official that we can start to go to one of the exchanges. They’re going to have to do their homework. Their regulatory departments are going to have to get fully on board like it’s going to take a little time.

So when you look at institutional dollars coming in, there’s a lot of keys to it, right, like look at how much our stocks gets shorted. These Canadian sharks that short our stock every day, they’re not scared of anything because there’s not big dollars that are going to come in and flush them out. Now you start to get, okay, we have institutional dollars can come in. And now you really have to make sure that if you want to come in and short our stock that you’re going to be able to cover your positions, because you could get squeezed out very quickly.

And then I think it’s also really misunderstood is that like, there’s virtually no new dollars coming in. And so like you work at one of my competitors. I’m not going to go talk to your shareholders, because I’m trying to steal your dollars for you to get invested in my business. And it’s kind of like this rotation of dollars. Look what happened when MSOS launched the second fund. I mean, the market overall, there was a boom. And then look at what Nancy Mace announced potential legalization from a Republican perspective, from a State act, our stock was up 25% in three days.

And so the potential room is there, and the institutional dollars could be game changing for the space.

RS: Yeah, it’s interesting to — it’s going to be really interesting, I think, to see how it plays out and how it reaches some kind of equilibrium. Do you feel like that there’s something happening in the industry that investors aren’t paying enough attention to, whether it’s kind of these catalysts coming, whether it’s products on the market, whether it’s new states coming online? And along with that, how do you envision kind of federal legalization? Do you think that it’s a series of states going online until there’s no choice but for the federal government to legalize it? How do you see that playing out?

AM: Yeah, I think — yeah, I don’t think there’s really anything that investors are focusing in on. I mean, again, us collectively as an industry, and I know my colleagues that are in very similar roles. I mean, we have constant dialogue with investors. And we’re — I mean, I think they understand the space extremely well, and where the growth drivers are going to come from. Everybody wants to know the timing, right, like the Connecticut Governor tweeted that he anticipates adult use being turned on by December. And so now everyone’s all excited about Connecticut, but we’ve heard nothing else. And we’re all hanging on to hope for like, one tweet from a governor like a few months ago.

And so I think investors understand the growth. They just don’t understand the timing. And so I think that’s a little bit of a frustration point. But legalization. I mean, obviously, it could be game changing, but we want the government to take its time. Like, we do not want to rush to anything to make sure that the market rolls out in the correct fashion. And by that, I mean you don’t want to overtax, Illinois on some of the highest THC products from a retrospective. It’s already 48% [ph]. And so if the government wants to fill in and 280E gaps, let’s be very clear here, like, this isn’t all about just social equity reform. And the government understands that if you eliminate 280E, that’s billions of dollars that go away, like how do you fill in that gap? What you’re going to do with the federal excise tax.

Well, then, later on, I’ve seen 20% to 25% thrown out there, you’re going to come in and buy a vape cartridge in Illinois and pay 65% taxes. So like we want the government to take its time. And our preference would always be for state optionality. And so when you look at like the two differences between the Republicans and the Democrats, the Republicans have announced a potential plan. This was Nancy Mace back in the day where it’s like access to capital markets, obviously, federal banking.

States’ rights, I think this is a big one where it’s like medical programs will be legal in all the states. But if you want to roll out a rec program, that’s up to you. Interstate commerce isn’t on the table, and then now you’re going to have a 4% to 5% federal excise tax. Like if we could write that ourselves, that’s what we would write. And so we want to make sure that the program rolls out appropriately. I think you’re going to have amendments to the CSA before you see full blown, legalization because I don’t think the government truly understands the industry well enough to roll out a federal program.

So I think they will play state by state for a little while. And I think over time, you’ll start to see either new amendments being rolled out and then potential federal legalization, but we’re going to continue to work with regulators and make sure that they understand the story.

RS: And how do you envision Verano’s place within that ecosystem as it develops, as states come online, as the federal picture gets a little bit clearer, as bigger companies from different industries come in? How do you see Verano’s place within that?

AM: We want to take a lead role in making sure that we’re staying in front and center to not only educate but play a valuable role in in trying to push through some of these amendments and conversations. And for me, it’s like I go and I talk to the NYSE, I talk to NASDAQ and have them fully understand what the potential in the industry is about, because when you can start to partner with financial institutions of that size, and then they understand what the industry capability is, then they have better context and give from a financial market perspective.

And so it’s leveraging our relationships from there. We’re working in DC, we’re working on a state by state level, and people are learning cannabis like look at the CRC in New Jersey. Yeah, sure, there was frustrations with the amount of time that it took to actually roll out the program. But the whole CRC had to learn, like they all had to learn the space, and then you have to get other people comfortable with cannabis. I mean, that takes some time, because cannabis has such a bad reputation in almost every state, that like, it takes time for people to fully understand that it’s not just about tax dollars, but it’s also about clemency and expungements. And it’s also about rolling out a program and let’s be honest here from a medical perspective that could really help the nation from, from an overall perspective.

So we’re just taking a lead role, leads spear position where we’re going to continue to have conversations and educate as many people as we can.

RS: Do you envision it as like the top operators, which is probably the top MSOs as being able to survive intact? Or do you think that most, or not even most companies, but I would say the top operators, do you see them partnering with an existing bigger company? Or do you feel like, by the time federal legalization rolls around, the strongest operators will be able to kind of survive and thrive through that,

AM: I think you’re going to see continued consolidation. I think there’s been a reason it’s been delayed, obviously, where the equities are trading at. And it’s been — we’re continuing to have conversations, but there hasn’t been massive amounts of M&A announced, over the last little bit, due to some of that. But over time, I think you’re seeing some smaller operators start to get pinched right on cash flow and margins, and pricing has impacted them, and they don’t necessarily have the footprint and the economies of scale, to the kind of weather the storm.

And so I do think that you will see potential consolidation down the line where you might have just a handful of operators kind of run in the space, and then obviously some smaller players that are going to roll in. But I think right now, if we actually look at, like who can survive, if SAFE takes 10 years to pass versus who’s kind of like watching the news every day to see if there’s any movement on that front, I think you can get an idea of kind of how the market would shape up.

But again, we want as many players in the space as we can. We’re always going to maximize our footprint, every state that we operate in. But we have a reputation of playing extremely nice in the sandbox, and we want to make sure that we’re helping everyone succeed as much as we can.

RS: Well, Aaron, I think that’s a nice place to leave it unless you want to share with our audience how they can find you, get in touch with you or anything else about Verano.

AM: Obviously, you can go to www.verano.com or investors.verano.com. You can also email us in our investor mailbox. It’ll be on our website. Our ticker symbol is VRNO on CSE. It’s VRNOF on the OTC market. And again, the one thing that we pride ourselves on, and I’ll leave you on this note is the hospitality mindset. The last time you come to a dispensary of ours is what you’re going to judge us on. The last time you and I have a conversation is what you’re going to judge us on. So we want to make sure that our investors understand how much we appreciate them.

I don’t care if you own 10 shares or a million shares like we will always make ourselves available and give you as much information as we can.

RS: Thanks so much for listening to The Cannabis Investing Podcast. Subscribe or follow us on Seeking Alpha, Libsyn, Apple Podcast, Spotify or Stitcher. And we’d really appreciate it if you left us a review on Apple Podcast. It helps other investors find our show and makes us feel fantastic.

If you have feedback or questions, we’d love to hear from you at [email protected]. Nothing on this podcast should be taken as investment advice of any sort. I’m long Trulieve, Khiron, Isracann Biosciences, The Parent Company, Ayr Wellness and the ETF MSOS. Subscribe to us at Libsyn, Apple Podcasts, Spotify or Stitcher. Thanks so much for listening and see you next time.