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Cresco’s wholesale business, which accounts for more than half its revenue, grew even faster. The company is moving aggressively to distribute its products beyond its own stores.

Neither company has reached profitability. Cresco lost $4.7 million on $94.3 million in revenue in the second quarter, and GTI lost $12.9 million on sales of $119.6 million.

GTI and Cresco made bold bets two years ago by going public through reverse mergers in Canada. Share prices surged initially but wilted as Canadian marijuana legalization got off to a rocky start. They scrambled to raise money to build out cultivation centers and stores in Illinois and other markets. “Capital has been incredibly challenging over the last 12 to 15 months,” says Cresco Labs CEO Charlie Bachtell. “It was only available to a handful. That’s part of the defining element of the top tier.”

Despite the rebound in their share prices, GTI and Cresco are well below their peaks. GTI went public at $6 per share in June 2018 and reached $23.16 on Sept. 18, 2018. Cresco went public in December 2018 at $5.15 and hit $13.21 on April 26, 2019.

GTI has been winning over analysts such as Cowen, which says the company is its top pick among cannabis stocks for “being one of the few U.S. cannabis companies that is generating positive free cash flow.” Cresco says it will be cash-flow positive in the second half of the year.

Shareholders don’t want to see them sacrifice profit for growth. While the industry is still ripe for consolidation, CEOs are cautious about the huge bets that were commonplace 18 months ago. “We’re evaluating deals all the time,” GTI CEO Ben Kovler says. “As individual states we’re already in become more attractive, the hurdle to invest outside becomes higher and higher.”

Bachtell says Cresco also is open to small acquisitions in existing markets, as well as potential strategic moves into new markets, such as Florida. “We’re going to be incredibly selective,” he says. “You have to show you’re building a responsible organization.”

Capital remains expensive and hard to come by, mostly because Congress hasn’t legalized weed at the federal level. But companies are preparing for that to change. There’s growing optimism in the industry that federal legislation could pass that would free up large U.S. institutional investors to invest directly in weed stocks on the Nasdaq or New York Stock Exchange.

GTI already has registered with the Securities & Exchange Commission, which requires more-detailed financial statements than Canadian regulators. Cresco and others are taking similar steps. GTI went further, filing a shelf offering with the SEC to sell up to 10 million shares, or about $140 million in stock, to U.S. investors.

“As change occurs, it’s hard to say when or how, we are very well positioned,” Kovler says. “We’re ready. Being in a position like this, heading into the election, has upside. Blue-chip U.S. institutional capital is studying the cannabis industry. It’s a major consumer products industry the capital markets won’t ignore.”

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