The parent company of High Times announced a major expansion into the cannabis growing and processing industry on Friday, saying it has begun the process to acquire California-based cannabis holding company Humboldt Heritage Inc. and its subsidiaries Humboldt Sun Growers Guild and Grateful Eight LLC.
Hightimes Holding Corp. said it had inked a letter of intent to acquire Humboldt, which will give it “cannabis growing, processing and product manufacturing capabilities direct from the most coveted cannabis community in the world, Humboldt County.”
“High Times’ mission is to connect consumers to cannabis – not only the best access and experience, but by making the best products available to our consumers across the country, and eventually the world,” Adam Levin, Hightimes Holding Corp.’s Executive Chairman said in a statement. “This addition adds 200+ of the best cannabis-producing farms in the world, and the rest of the capabilities we’ll need to grow into the future as a larger High Times family!”
High Times They Are a-Changin’
It has been a busy year so far for this publication’s owner. In January, Hightimes Holding Corp. named Stormy Simon as its new CEO. Simon, who joined the company after previously serving as president of the online retailer Overstock.com, succeeded Kraig Fox.
“The cost of customer acquisition has plagued the cannabis industry thus far, but utilizing the High Times brand’s global audience, we should be able to monetize our traffic by connecting consumers to cannabis products at an unprecedented scale,” Simon said at the time of her hire.
Later that same month, the company announced it will be opening two flagship retail stores in Las Vegas and Los Angeles. The first two stores will set up shop in a pair of the biggest cannabis markets in the United States. California legalized recreational marijuana use in 2016, while Nevada did the same a year later. Currently, there are 11 states in the country that have lifted the prohibition on recreational pot use.
Barry Nachshon, CEO of Humboldt Heritage Inc, said in a statement on Friday that the acquisition “allows our cultivators’ and their artisan brands unprecedented exposure to consumers as High Times reaches millions of people all over the world.”
“The farmers in Humboldt Country have been leading parallel missions to High Times over the past 45 years,” said Nachshon. “Knowing that we will be part of the High Times family, as well as a key manufacturing and supply chain partner as the company enters the retail and delivery markets in California is very exciting for our team.”
There was a time—it may seem like ancient history given the tidal wave of cannabis legalization sweeping the nation—that to be photographed smoking or growing the plant was to risk being arrested.
How much has that changed? Just ask Ophelia Chong, founder of StockPot Images, the California-based agency that has become a clearinghouse of cannabis-related photos, some 20,000 of them, the first and largest such collection, available for use by magazines, websites and anyone else who needs a photo, but doesn’t have the time or resources to hire a photographer.
For a 58-year-old who avoided cannabis most of her life, it’s the culmination of a long career in the visual arts and major opening-of-eyes regarding the plant. And she’s on a very personal mission to show that the stereotypes that have long been associated with cannabis are very wrong.
“My whole passion is speaking for people who are on the outliers [of society],” said Chong. “That was always my specialty . . . How do you talk about this community and bring it into the mainstream in a powerful yet educational way?”
Chong (no relation to cannabis icon Tommy Chong) grew up in Canada, a child of first-generation Chinese immigrants. After graduating from the ArtCenter College of Design in 1989, she began photographing musicians for magazines and record labels.
“I believe everyone has at least six careers in your life,” she said. Her first career involved photographing and spending time with ’90s radio mainstays such as the Goo Goo Dolls and Alanis Morissette. Alcohol was very prevalent in the scene; cannabis, not so much.
She produced films. She taught art. She took photos. She marketed photography. But it took a personal experience to bring her into the cannabis industry.
Around 2015, Chong’s sister came to visit her in California, in search of help with the incurable skin disease scleroderma, which causes the skin to harden and tighten. In its most severe form, it can lead to organ failure and death.
Her sister wanted to try cannabis as an alternative to pharmaceuticals to treat the pain. “I said, ‘Oh my God, my sister is a stoner,'” said Chong. “I started to cry. Here I was stereotyping my sister into this thing, and I realized how wrong I was.”
“My whole passion is speaking for people who are on the outliers [of society].”
Her eyes thus opened to cannabis as a medicine and not a drug, and Chong began looking around at the types of stock images available related to the plant. Most were of addicts, convicts or drug dealers.
“I realized, ‘This is how the mainstream sees cannabis.’ I was first outraged by my own ignorance, and I was further outraged by how everyone else thought too. I wasn’t the only one.”
So, StockPot Images was born. She wanted a way to show cannabis as medicine, consumers as patients and not as criminals, and people like Dennis Peron, who founded California’s
first public medical cannabis dispensary and fought for much of his life for legalization before dying earlier this year.
It took a lot of cold calls and a slow gaining of trust to get people to be photographed growing or smoking a Schedule I substance.
Said Chong, “I basically started from zero. I didn’t have a foothold in the community. I didn’t know anyone in the community . . . I didn’t even know how to roll a joint.”
Trust she built, as well as a large network of photographers, since most of the 20,000 images in the StockPot Images collection were taken by others, who receive a royalty when their photos are used. She said her royalties are much more generous than what other major stock photo companies offer.
The more she immersed herself in the industry, the more she wanted to convince others of its benignness.
Asian Americans, many raised by conservative first- or second-generation immigrants, have not always played a huge role in the nascent industry. Chong hoped to change that by co-founding the Asian Americans for Cannabis Education, to help change attitudes and invite more of that demographic into the industry.
The goal, she said, “was to reach out to my own people and tell them what cannabis is about. By highlighting Asian Americans in this industry, I can show that yes, we have families. We pay our mortgages. We have children, and we’re normal. And we’re in cannabis.”
After all, if she can change her own opinion, why can’t others? She even consumes cannabis now, strictly at night to help her sleep.
“That’s the great thing about the market. If I can market it to myself and bring myself around, then I can do it for my own age group as well.”
As states continue to legalize cannabis, there has been increasing interest and questions in and about foreign investment into the U.S.’s booming cannabis industry. As would be expected, much of this interest is from Israel, Canada, Spain, Turkey, South America, the Netherlands, the United Kingdom and Germany. These investors are interested in certain states in particular, like California, because of the size of their markets, but also because certain states have no residency or citizenship requirement to be able invest in cannabis businesses.
In general, foreign direct investment (FDI) refers to any type of cross-border transaction where a company or investor from Country A invests money in a company located in Country B. It generally doesn’t refer to dumping money broadly into stocks and bonds—it is specifically about a concentrated, single-enterprise investment.
FDI exists in several forms. Foreign investors can start a new company and can finance and build it from the ground up. They can participate in a joint venture with U.S. partners. They can wholly or partially acquire a U.S. business. They can also take a lighter touch, where they provide primarily branding and process support while having U.S. parties take on the bulk of the financial risk—the basic franchise model.
In the cannabis industry, there are already large FDI projects in cannabis ancillary services (i.e., the companies that provide the goods and services that support the actual cannabis plant-touching businesses). Foreign investors have opened up domestic companies for the manufacture and import of cultivation equipment like grow lights and hydroponic equipment, processing equipment like automated trimmers and extraction machines, and associated inputs including soil, fertilizer, vaporizer batteries and cartridges. There have also been large amounts of foreign money invested into cannabis real estate projects.
“These investors are interested in certain states in particular, like California, because of the size of the market, but also because certain states have no residency or citizenship requirement to be able invest in cannabis businesses.”
In addition to buying the real estate, the foreign investors put money into greenhouses, grow lights, storage facilities and more to offer turnkey cultivation and processing facilities for lease to local businesses. These companies are largely unregulated at the state level, and their foreign investment issues are similar to non-cannabis businesses, dealing with things like registering as U.S. taxpayers for partnership taxed businesses, complying with the Foreign Investment in Real Property Tax Act and dealing with immigration issues.
For firms directly involved in the buying and selling of cannabis, state-specific restrictions become more of a concern. States like Washington do not allow anyone who is not a state resident (much less not a U.S. resident) from having any profit interest in a cannabis business. Contrast that with California and Oregon, which are extremely liberal with their cannabis regulations, and there is no residency or even citizenship requirement to participate. Still, state regulations and state laws are typically written with U.S. residents in mind.
In turn, things like criminal and financial background checks on foreigners remain in a bit of a grey area. Ultimately though, neither state officials nor the Federal Bureau of Investigation are likely to have any real information on foreign nationals who haven’t had prior contact with the United States. How the U.S. federal government will react to foreign ownership in terms of the Department of Justice (rather than via immigration through the Department of Homeland Security) still remains to be seen, though nothing’s been publicly reported that’s a red flag against foreign cannabis business ownership in states that don’t have resident or citizenship requirements.
As far as federal laws go, the Controlled Substances Act doesn’t differentiate between activities that are international, interstate or fully intrastate in nature. Possessing, manufacturing and distributing cannabis are illegal federally regardless of where the company’s owners live. Still, there are a couple of criminal statutes that add fuel to the fire when interstate and international commerce are involved. 18 U.S.C. § 1952, for example, criminalizes traveling or using the mail in interstate or foreign commerce with intent to distribute the proceeds of cannabis sales.
More questions arise when considering foreign ownership in the context of the Department of Justice cannabis enforcement memoranda that cannabis-legal states are working under. The main takeaway from the Aug. 2013 Cole Memorandum (which has been rescinded by U.S. Attorney General Jeff Sessions) was that if the states want to keep federal law enforcement away, they need to make sure their regulations prevent state licensees from violating the various federal enforcement priorities. One of those priorities was that state regulations need to prevent “revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels.” If the state and federal criminal background check databases don’t have extensive coverage on foreign crimes, how can a state, including California, have faith that the foreign investors don’t fall into one of those categories?
For now, with no broad pronouncements apparent, it appears that the federal government is taking a wait-and-see approach to foreign ownership of state cannabis businesses. That means it is up to state cannabis business participants and the states themselves to ensure that foreign owners do not violate federal enforcement priorities.
By the Numbers – Q4
The amount of money, in millions of dollars, that one of the largest California-based cannabis distributors, Nabis, raised in seed round funding in the beginning of October: 1.25 (Source: Nabis)
The amount of money, in millions of dollars, that Colorado-based cannabis company Dixie Brands, Inc. received in a Series C funding round that ended in early October: 25 (Source: Dixie Brands, Inc.)
The percentage of patients participating in an Israeli study who said that they saw improvement with their PTSD symptoms after consuming cannabis for six months: 96 (Source: Forbes)
The decreased percentage of Canadian-based Tilray, Inc. stock shares after PepsiCo Inc. announced that it has no plans to invest in cannabis: 16 (Source: CNBC)
The number of Alberta, Canada cannabis dispensaries that began operation on Oct. 17, the day that legalization officially became legal: 17 (Source: Global News)
The number of people who registered to become medical cannabis cardholders between January and October 2018 in Illinois: 46,000 (Source: Chicago Tribune)
The number of Massachusetts recreational cannabis dispensary licenses that have been approved so far, as of early October: 2 (Source: Boston.com)
The number of Michigan House of Representatives votes, out of 105, that were cast in favor of banning the consumption, possession or sale of cannabis-infused alcoholic beverages: 101 (Source: WXYZ)
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