How Russia Prepared Renaissance Capital Co-Founder Boris Jordan For The Cannabis Industry
Curaleaf Holdings Inc (OTC:C) has become one of the largest cannabis companies in the U.S., with 33 dispensaries, 12 cultivation sites and 10 processing facilities across 12 states.
Marijuana's federal illegality in the U.S. has led Curaleaf and and several other large American cannabis companies to look north of the border for go-public opportunities.
Curaleaf went public Oct. 29 on the Canadian Stock Exchange following a reverse takeover transaction after conducting an oversubscribed private placement in which it raised $400 million. The RTO valued Curaleaf at a whooping $4.5 billion, confirming its status as one of the largest U.S. cannabis companies. When Medmen Enterprises Inc (OTC:MMNFF) went public on the CSE, it was valued at $1.65 billion.
Curaleaf's Chairman Boris Jordan spoke with Benzinga about his unique path to the cannabis industry — and how his experience in wide-open 1990s Russia may have helped prepare him for the dynamics of the American cannabis industry today.
Seizing Opportunity In Russia
The Curaleaf chairman got his start on Wall Street in 1987, working for the now-defunct investment firm Kidder Peabody with a focus on Latin America. After the fall of the Soviet Union in 1991, Russia quickly turned from a planned economy to a more capitalistic system.
Jordan, who was born in the U.S. to European parents with Russian ancestry, said he saw the fall of the wall as an opportunity and decided to fly to London, where he made contact with First Boston. The investment bank hired Jordan to lead its Russian operations, he said.
In 1992, Jordan moved to Moscow. Amid the wave of privatizations that swept Russia, First Boston’s Moscow division became the most profitable in the company within two years.
After leaving First Boston, Jordan founded Renaissance Capital in 1995. It became one of the largest investment banks focused on emerging markets. In 1998, Jordan founded The Sputnik Group, where he continues to work as president and chairman.
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From Data Centers To Oil
Jordan led Russian TV Channel NTV and Gazprom Media, a subsidiary of Russian natural gas company Gazprom (OTC:OGZPY), until 2003.
After Russia, Jordan switched his attention to Europe and began buying data centers across the continent. “After the dotcom bubble burst, there were plenty of opportunities,” he said. “We were buying data centers all through 2007 and we ended up accumulating the largest company in data center providing in Europe called TeleCity. We ended up taking it public and selling it to Equinix Inc (NASDAQ:EQIX).”
As TeleCity was conquering the data center market in Europe, Jordan turned his attention further west. In 2006, Jordan’s Sputnik Group started buying shares in Innova Exploration, a company that held assets in the Canadian Bakken. In 2007, Jordan was appointed to Innova’s board and, later that same year, the company was acquired by Crescent Point Energy Corp (NYSE:CPG).
Switching To Cannabis
Jordan started looking at the U.S. cannabis industry circa 2013, he told Benzinga.
“It got me very excited because I thought it was an artificially repressed product,” he said. “If you think about it, before 1923 cannabis was used in the United States and all over the world. Basically, it was the pharmaceutical companies and the alcohol companies that moved to outlaw cannabis.”
With this in mind, Jordan invested in PalliaTech, a company that was developing a system for delivering cannabis to medical patients.
“But I quickly realized that the FDA wasn't moving very quickly in this space, so I reoriented the business into the vertically integrated marijuana space and I joined up with my partner Jo Lusardi in Massachusetts.”
PalliaTech held a license for medical marijuana in New Jersey and applied for one in New York. Lusardi was the first to open a medical marijuana business on the East Coast in Maine and applied for a license in Massachusetts.
Lusardi managed the new company, while Jordan and his partners provided funding and invested $200 million.
In 2018, PalliaTech announced it was changing its name to Curaleaf Holdings to better align with its brand of retail dispensaries and products.
“And even with everything we've done, it's early stage,” Jordan said.
Curaleaf: ‘Starbucks For Cannabis’
Jordan likes to compare Curaleaf to Starbucks Corporation (NASDAQ:SBUX).
“We see ourselves very much like Starbucks. We are building a product and retail distribution business.”
Even though Curaleaf boasts one of the largest cannabis distribution networks in the U.S., Jordan views the company as being small.
“The market is very big, so we're very excited about it. We are very focused.”
In its last earnings report, Curaleaf said it plans to reach 40 locations by the end of 2018 and at least 67 locations by the end of 2019.
Similar to some other U.S.-based vertically integrated cannabis companies, Jordan said international expansion is not the right move for Curaleaf at this moment. Instead, the company is focusing on domestic growth and could always pursue international markets at a later stage via M&A.
Lessons From A Chaotic Economy
Jordan said his experience in Russia helped him a lot when pursuing opportunities in the U.S. cannabis space.
“There was very opaque legislation. The barriers to entry were incredibly difficult,” he said of investing in Russia.
“And that reminds me tremendously about what we are faced with here," Jordan said, referencing the lack of banking available for marijuana businesses, opaque rules and complex regulatory environment.
"Even getting a store open can take nine months: negotiating with local authorities, fire departments [and] negotiating with state cannabis organizations."
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