Curaleaf: No Change to Outlook for Now as We Think New Jersey Adult-Use License Will Be Renewed

On April 13, the New Jersey Cannabis Regulatory Commission’s board denied renewal of Curaleaf’s CURA cultivation and retail licenses for adult-use cannabis. Two adult-use dispensaries may need to halt sales by April 21, though a third dispensary that opened more recently and Curaleaf’s medical licenses are unaffected. The company gained access to the state’s legal recreational market when it opened in April 2022 and has since grown its cultivation and retail footprint in the state. The board’s ruling was a surprise to us, as it went against the commission’s own executive director’s recommendation and was the only renewal applicant to be denied. The market was surprised, with shares down over 7% on Friday, April 14.

Commissioners seemed to have issues with Curaleaf’s decision to close cultivation at its Bellmawr facilities, particularly around the lost jobs and proper communication with the regulators. The vote was split with two commissioners voting “no,” two voting to abstain, and one voting “yes.” Given the commissioners who voted to abstain cited a lack of information, we believe Curaleaf will be able to resolve any outstanding issues eventually, though the board will not reconvene until June. It remains unclear what will happen to the affected facilities in the meantime.

For now, our $25 and CAD 34 fair value estimates are unchanged, along with our outlook and no-moat rating.