The nascent legal New York recreational marijuana market – which launched in December 2022 – is on the financial brink, according to the president of one of the state’s larger cannabis trade organizations, who said a lot of license winners have been either flipping their permits or selling equity stakes just to get cash to continue operations.
Damien Cornwell is the President of the Cannabis Association of New York. Green Market Report In a recent article.
The market is clearly inverted, with outside products finding their ways into New York through licensing agreements and partnerships. New York Farmers are affected by it.
Cornwell stated that due to the federally illegality of marijuana and the absence of business funding options, business licensees were unable to finance the build-outs necessary to open. Retailers are struggling to pay restocking fees, while farmers can’t afford to make much-needed repairs.
The people have liquidity problems. Cornwell stated that they have cash shortages. I know of CANY members who lost greenhouses due to weather in New York’s upstate. … What the hell does that person do? “Has a successful business but needs to fix it. The only people they can speak to are family members or some type of investment professional that will have predatory loans.”
Another major issue that’s causing a cash crunch for retailers like him – Cornwell owns Just Breathe, a licensed dispensary in upstate New York – is the major price compression over the past two years.
Cornwell stated that “when the market opened for the first time, say in February 2023, eighths of cannabis flower were being sold at $27 or $30 per eighth before any retail markups.” Cornwell said that today, eighths are available for $7. You can then sell them at $14. Then you will find another store who will lower that price to $12. It’s crazy. “It’s an extremely, very difficult situation.”
Cornwell said that one possible solution that CANY has floated to state lawmakers – and which was mentioned during a legislative budget hearing last week – is a revolving loan facility or credit line with the state of New York, which could be a source of business capital for licensed marijuana companies. According to Cornwell, Sen. Jeremy Cooney from Albany has been a strong ally of the cannabis industry for many years and expressed interest in implementing such a plan during the legislative session last year.
Last year, we had a plan to assist farmers. We called people from the supply-side to find out if they could help us get up to $150,000. Cornwell: “I’ve also heard from others who would prefer a loan program that allows people to borrow up to $675,000.”
Cornwell warned that the proposal, in its concept, is not yet solidified. The major question – particularly after Gov. Kathy Hochul’s 2025 budget proposal called for repayment of $50 million that was dedicated to a cannabis social equity fund three years ago – is where exactly the money would come from.
We are concerned about certain aspects of the plan because, on the whole, I don’t see how they can be funded without private funding. That could have long-term dangers. Cornwell stated that you would essentially be having the DASNY(Dormitory Authority of the State of New York), effect, again. The $50 million state funds only funded 22 dispensaries and fell far short of the 150 store target.
With all of these obstacles rolled together, Cornwell said, the upshot is an increasing number of licensees – including social equity businesses – are either selling ownership stakes or cashing out altogether for whatever they can get on the secondary market. He said that many early CAURD permit holders were walking away because they could not find the capital to start dispensaries.
There are more people willing to sell or take on partners. That’s what we have seen. Cornwell commented, “It’s all happening.”
What can you do with a golden ticket? “Some people are selling them for pennies and others for good money,” he added. “I ultimately find it heartbreaking.”