Adam Jackson
In a shocking turn of events, multistate operator Curaleaf (OTC: CURLF) was denied a renewal of its adult-use licenses by the regulatory board of New Jersey.
The New Jersey Cannabis Regulatory Commission’s decision will affect two cultivation facilities and two stores in Edgewater Park and Bellmawr, and could force Curaleaf to cease selling adult-use cannabis in the state by one of the biggest sales days of the year, April 20.
For context, the Bellmawr retail location is one of the most profitable stores in the country, with monthly sales estimated at $7 million.
The denial is thought to be based on Curaleaf’s decision to wind down operations at the Bellmawr facility, which could be considered a modification to the original license.
Curaleaf released a statement saying:
Today’s unprecedented action by the New Jersey Cannabis Regulatory commission’s Board – which overrode the Commission’s own staff recommendations that our adult licenses be renewed – is an outrageous act of political retaliation for our need to consolidate production into one local facility. Curaleaf has never been cited for such a violation and there is no regulation requiring permission for the staff reduction we announced. This type of politicization will only serve to further undermine the state’s nascent cannabis industry. To be clear: Curaleaf is in good standing with the CRC and has fulfilled the requirements necessary for the renewal of our licenses.
The statement went on to claim that the decision was arbitrary and lacking in any legal standing. The company said it would affect 500 employees.
New Jersey Meeting
At the April 13 commission meeting, representatives from Curaleaf, including the chief compliance officer and director of corporate responsibility, spoke about the investments they had made in the state, the tax revenue generated, and the jobs they had created.
The two also discussed their commitment to maintaining positive relationships with employees and promoting social equity in the cannabis industry.
Out of five members, two commissioners voted against renewing Curaleaf’s license and two chose not to vote.
Chairwoman Dianna Houenou, a former top adviser for New Jersey Gov. Phil Murphy, chose to abstain. Houenou was tapped by the governor as chair of the commission in 2020.
Some board members expressed concerns about the accuracy of the certification materials provided by Curaleaf, layoffs that had been made without proper notice to the commission, and the need for more transparency from the company.
Last month, Curaleaf temporarily closed one of its grow facilities in Bellmawr and laid off employees without informing regulators first, which some on the board cited as a violation of the rules that govern how cannabis companies can operate in the state.
“My vote on this is a difficult vote to cast,” Houenou said on Thursday.
“There have been significant questions and concerns that have been raised by my colleagues on the board … I think it’s important for the board, and the staff at large, to have proper insight and timely notice of major changes to a facility’s operations.”
Medical-Only
The denial affects two cultivation facilities and its two stores in Edgewater Park and Bellmawr, “the latter likely being its most productive store in the country with sales above $7 million a month as of Nov. 2022,” according to a Thursday note from Stifel.
“Given the lack of similar precedent events and cloudy details, we have limited visibility on the path forward for Curaleaf to have its license reinstated (its Bordentown store remains active),” the investment firm wrote. “Hence, we will revisit our forecasts and outlook for Curaleaf upon clarifications, but recognize that New Jersey likely represents a material portion of sales and profitability which could drive pressure on company shares, in our view.”
Losing this revenue stream could have a big impact on the company’s sales and profitability, which in turn could affect its share price – though it is not clear what will happen next for the company’s New Jersey operations, which is still allowed to move forward as a medical provider.
“I was encouraged by the work and the report out from our Office of Diversity Inclusion, as it pertains to Curaleaf’s efforts to promote social equity,” Houenou added.
“But it seems that there’s still a lot of missing information that can be provided – that should be provided. And that should be done in a manner that is forthcoming and transparent.”
This isn’t the first time Curaleaf has been accused of violating labors laws. The corporate giant has faced lawsuits and allegations of other wrongdoings, including cases of union busting and withholding tips from employees.
Columbia Care should stand to gain from the decision, as its Cannabist adult-use dispensary becomes the only other recreational store along the New Jersey/Pennsylvania border. Columbia Care is a direct competitor to Curaleaf in the state.
