The play for the US cannabis market has gained value in the eyes of investors, but one executive says not all multi-state operators are the same.

According to George Scorsis, CEO of Liberty Health Sciences (CSE:LHS), the popular multi-state operator of cannabis assets in the US, the business model is not the same all around for the current companies employing it.

In an exclusive interview with the Investing News Network (INN) Scorsis said he understands why investors are bullish on multi-state operators that buy assets across legal states, but views them as operations with a high chaos potential.


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“I think those, although quite appealing from a capital market standpoint, are going to be challenged in terms of operational effectiveness, as we take a look long term,” he said.

Liberty instead, Scorsis explained, elected to grow assets in a multi-state strategy since he views the long term play as a better one for this model.

The executive reasoned these operators with diverged assets across the country are “not really a unified operational company,” capable of integrating all the asses acquired, in the scenario cannabis becomes legal overnight in the US.

The legalization of the drug is a discussion point Scorsis is confident will become one of the most heated debates in the upcoming presidential election of 2020.

Cannabis remains illegal under federal laws in the US despite several states legalizing its medical and even recreational use.

Companies have been able to operate in states with legal views on the drug and even raise capital in the favorable Canadian market by reaching investors through the Canadian Securities Exchange (CSE).

Scorsis said Liberty has planned its facilities with a vision of what may take place in the political conversation surrounding the cannabis industry.


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Liberty counts with a robust presence in Florida thanks to four active dispensary locations. The company’s website shows five additional dispensary locations are opening some time soon in Florida.

The company is also building up a 387 acre site facility in Gainesville, Florida, which is expected to kick off production in 2019.

When comparing the cannabis industry to the consumer packaged goods (CPG) one, Scorsis said it’s not efficient for a company to be operational in 15 different states, but rather have strategically placed facilities to cover production.

“Florida, whether it becomes federal or not, has a very effective market place that we can address… but if it does open up I know that my Florida facility could probably service all the southeast of the US,” Scorsis said.

The executive expects the cannabis market to look a lot like the alcohol model for distribution, with stores available all around the country but specific facilities creating the product.

“I think many people that are spending a high level of capital on every single state right now and raising capital… is really going to end up to probably not the best use of proceeds from shareholders or the corporation,” he said.

Aphria connection remains possibility for Liberty

Liberty is in a unique position as the company holds a connection with a Canadian licensed producer (LP) that up until recently remained active.

Aphria (TSX:APH) built up Liberty to be its extension into the US market. However, the Canadian company faced a dispute with TMX Group regulators challenging its entry into the US.


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Due to the status of cannabis as an illegal substance at the federal level in the US, companies are not legally allowed to grow the plant and raise capital in Canada, according to the regulators of the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV).

Aphria was eventually forced to divest its assets in the US and in September sold its remaining stake in Liberty.

The producer isn’t entirely out as it still holds a right to purchase back its stake, that will last for the next five years.

When asked how the potential re-entry of Aphria into the picture, Scorsis said based on his expectation of cannabis becoming legal in the US as part of the upcoming presidential election, he expects Aphria will “use Liberty Health Sciences as their horse.”

Investor takeaway

In a research note issued on October 9, Canaccord Genuity kicked off its coverage of Liberty for a target price of C$2 and gave a “Speculative Buy” rating to the operator.

“We believe Liberty is starting to establish a strong presence in Florida’s rapidly growing medical cannabis market,” the report authored by Matt Bottomley, analyst with Canaccord, said.

The investor note also highlighted Liberty is expanding its business with assets and licenses secured in Massachusetts and Ohio. The analyst expects Liberty to reach C$20 million in revenue for the current fiscal year.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.


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