California cannabis market expected to reach $5.1 billion market value

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The cannabis market could triple in size in the next four years, according to Arcview Market Research and BDS Analytics new report, 'The State of Legal Marijuana Markets'. In fact, by 2022, the global cannabis market could be worth as much as $32 billion, a three-fold increase in just five years with the U.S. expected to fuel much of that growth with an expected market value of $23.3 billion. Much of the current growth we're seeing comes from California's cannabis market, which is expected to exceed $5.1 billion market value in the next year after legalizing its recreational use on January 1, 2018. Several legitimate cannabis market players include High Hampton Holdings Corporation (CSE: HC) (OTC: HHPHF), CannaRoyalty Corporation (OTC: CNNRF) (CSE: CRZ), CannTrust Holdings (TSX: TRST), Canopy Growth (NYSE: CGC) and MedReleaf Corporation (OTC: MEDFF).

With sizable growth in store for California's massive cannabis market, investors have been increasingly attracted to companies with exposure to the state, including High Hampton Holdings and its 10.8-acre property in Coachella, California, as well as CannRoyalty Corporation and its strong focus on California's cannabis consumer products goods.

California Legal Marijuana Attracting Big Business 

With nearly 40 million residents and more than a million medical marijuana patients, California's market represents about a third of the North American cannabis market. Months after California legalized recreational marijuana, BDS Analytics estimates that sales could hit $3.7 billion by the end of 2018, as reported by Business Insider, predicting that number will reach $5.1 billion by 2019. Analysts at Cowen & Co. believe the nation's legal cannabis industry could reach $50 billion by 2026, with California accounting for about $25 billion of that market, according to CFN Media Group.

Given the market growth, it's no surprise that companies are increasing their stake in California.

CannaRoyalty Corporation is just one of a growing number of larger Canadian companies that are increasing their share of the market for example. The company recently acquired RVR, a large-scale distributor of both medical and recreational cannabis, Alta Supply, a smaller medical marijuana company, and Kaya Management, an edibles and vaporizer producer. In April 2018, it also acquired Flora-Cal Farms, a licensed ultra-premium cannabis producer.

MadMen Enterprises recently broke ground on a high-tech cannabis factory in Desert Hot Springs, California, the company's second large-scale marijuana cultivation and manufacturing facility, reports New Cannabis Ventures. "The Desert Hot Springs facility is scheduled to open in early 2019 and service California's fast-growing adult-use marijuana market."

Even High Hampton Holdings Corporation (CSE: HC) (OTC: HHPHF) is just beginning to gain momentum, advancing its foothold in California's cannabis market through acquisitions and property development.

High Hampton Holdings' Dominance in California 

High Hampton Holdings offers an interesting opportunity in the state's cannabis market, as it actively seeks to consolidate California's cannabis industry through equity, royalty and direct property ownership with licensing agreements. For example, the company's CoachellaGro Corp. is developing a 10.8-acre property that it plans to develop into a cannabis industrial park. On May 2, 2018, the City of Coachella's Planning Commission granted a conditional use permit for the cultivation of marijuana.  

"With a conditional use permit for CoachellaGro in hand, we have created instant added value for this asset which will remain the cornerstone of our business model and be complemented by the aggressive acquisition process we have begun this spring as we consolidate the California cannabis market," said High Hampton CEO David E. Argudo.

The company also announced it had entered into a binding agreement with 8 Points Management and its subsidiary Bravo Distro, a fast growing California cannabis distributor, to acquire 100% of all issued and outstanding shares of both 8 Points and Bravo. The deal will provide High Hampton Holdings with immediate access to a major distribution hub in Sacramento, California.

"Securing distribution is a crucial if not the most important component of a successful business model for the Californiacannabis market," says CEO Argudo. "In 8 Points Management we have found a well-positioned operator that offers a full-service distribution model for our industry that will help us establish access to major distribution hubs in strategic locations throughout California including a prominent location in West Sacramento. Their team is renowned for already starting and operating another highly successful cannabis distribution outlet, and together, we are poised to succeed in building a leading cannabis distributor in California."

With a market cap of less than $65 million, investors are increasingly attracted to the company, especially with several catalysts for growth, including the Coachella property and the recent acquisitions of 8 Points Management and Bravo. It would appear the company is in the early stages of actively consolidating California's growing cannabis market to increase its value.  

Potential Comparables in the industry include: 

CannaRoyalty Corporation (OTCQX: CNNRF) (CSE:CRZ) is a private equity firm specializing in acquisitions. The firm invests in the legal cannabis sector with a focus on research and intellectual property, consumer brands, and industry infrastructure with a strong focus on California, one of the world's largest cannabis markets.  

CannTrust Holdings (TSX: TRST) produces and distributes pharmaceutical grade medical cannabis products in Canada. It sells dried cannabis and oil extractions to the client based on the medication document provided by health care practitioner. 

Canopy Growth (NYSE: CGC) through its subsidiaries, produces and sells medical marijuana in Canada. The company offers dried, oil, and soft gel cannabis products. Canopy Growth Corporation also sells its products through online.

MedReleaf Corporation (OTCPK: MEDFF) produces and sells cannabis-based pharmaceutical products in Canada. It offers dried cannabis, cannabis oils, and cannabis oil capsules; and various accessories, including grinders, vaporizers, and lockable containers.

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