Karma Koala Podcast 257: Jordan Ash – Equity In Cali Cannabis “Emotion It’s all we have left” | Cannabis Law Report | Where to order Skittles Moonrock online

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After our chat a couple of weeks back with Chelsea Haskins about the failure of the equity cannabis program in Sacramento I speak with lawyer Jordan Ash who has more than a few equity clients. The summation? The situation is dire statewide with regard to equity and not much can be done to improve things.

Have a listen to what Jordan has to say..

This is what he wrote on Linked In a few weeks back

It’s truly a tragedy how many hashtagsocial hashtagequity hashtagcannabis operators who’d been actual prisoners for cannabis-related crimes are now essentially prisoners to the very same licenses that were supposed to redeem them.

It is no secret that the industry here in hashtagCA has been and continues to be hemorrhaged by a draconian regulatory-tax scheme and way too many have been left with no option but to cut their losses and sell out.

However this is not simple for equity operators for whom regulations are in place which restrict their ability to transfer as much as 51% of the company holding their respective licenses.

These regulations were initially drawn up with the intention of redeeming and protecting eligible equity individuals who had been negatively impacted by the war on previously illegal cannabis – the assumption being that the cannabis industry would do far better than it has and that reserved equity would actually be worth something to these individuals.

8 odd years later and you’d be hard pressed to find an equity licensee who’s felt that the benefits outweighed the costs – in fact for many it has been only cost as they operate these expensive businesses with no protection from black market competitors and no real relief in sight.

Now enter a new wave of buyers looking for cheap fast deals to take these licenses off struggling operators’ hands. They have a tolerance for risk, but not so much for partners, so they’re buying the whole thing.

The problem for equity operators is the”cell” of regulatory restrictions that’s been built around them – if they’re lower tier it might be a 1/3 of the company that can’t be sold, and if the highest tier 51% of the company would remain with seller – not so appetizing to many buyers as it turns out.

A substantial portion of my practice is spent dealing with the complexities arising out of these deals, and although there are ways to mitigate the damage it is the social equity sellers who almost always end up with the short end of the stick.

The ones reaping the most benefit out of that transaction are the attorneys having to negotiate and draft accordingly. The buyer might be next as they tend to have more leverage in negotiating a purchase that is contingent on a laundry list of approvals and occurrences over the course of what could be years. And to that end the seller, as the one backed into a financial corner and hands tied by regulations, is at the greatest disadvantage.

There are other pending state cannabis legalization measures as well as federal legislation such as the hashtagMORE Act that have social equity components still being negotiated, most of the disagreement being about the implementation of these programs.

I think the CAutionary tale here for these legislators is to recognize the extraordinary cost and risk involved in cannabis, assume that these businesses will fail, and provide better exits for the people they’re supposed to be helping.

https://www.linkedin.com/feed/update/urn:li:activity:7328556297396596736/