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The Pros and Cons of Marijuana MSOs

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23.09.2021

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Multi-state operators (MSOs) are an intriguing model for many cannabis investors. But are these conglomerates evolving into a position at the top of the cannabis investment food chain?

Let's first briefly review what MSOs are, and the pros and cons of investing in them. Then we'll explain how you can go about dipping your toe into MSO stocks.

A multi-state operator helps a brand expand nationally while carefully remaining within federal laws limiting interstate commerce. In short, cannabis grown in one state must remain there.

Yet a single brand representing a collection of operators can grow and gain brand recognition when sold locally under the same product name – but by legally distinct entities. This tactic means the MSO can build a loyal customer base, and prepare financially and operationally to go national when federal laws do, one day, allow it.

In the meantime, they function and aim for profitability through local, state-by-state "branches" offering seemingly identical products, but all locally grown, processed and distributed.

There are three obvious challenges to the MSO model:

Are these problems insurmountable? Certainly not.

While the challenges are real, multi-state operators have significant leverage in the market. Well-planned and managed MSOs are flourishing and providing attractive returns and are outperforming the market. In fact, multiple MSOs are reporting year-over-year growth with line of sight to $1 billion in annual sales.

They're clearly doing something right.

So, how can investors invest in multi-state operators?

For most........

© Kiplinger


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