UPDATE (December 9, 10 a.m.): We posted the below article below on December 8th at 7:30 a.m. Just 12 hours after we posted, the State of Nevada issued a new policy statement regarding expiration of licenses:

If an MME has submitted its provisional registration renewal on time and continues to make significant progress towards opening, the Division intends to take no action on the MME’s certificate at the 18-month, May 3, 2016 deadline. However, if the MME is not making an effort to become operational, is unresponsive, or submits misleading or incorrect renewal information, the Division reserves the right to investigate and revoke the MME’s registration.

That means in most cases the urgency investors had to sell or purchase MME licenses has mostly evaporated. We like the approach the State has decided to take as it will help patients in our state. Note that this action may also cause the value bubble to burst since the urgency that was driving prices skyward is no more, or at least has been greatly alleviated. We expect to see (and be involved in) a number of MME license sales over the next few months, but only time will tell.

We have previously blogged here and here about the secondary market for MMEs in Nevada. Every week our Las Vegas office gets numerous calls from people wanting our help in buying licenses for Nevada dispensaries, production facilities, and cultivation facilities. Problem is that we get far fewer calls from people trying to sell these licenses. Right now it’s a sellers market! That’s great news for license holders, but not so much for license buyers.

Nevada License Status. If you’re a frequent reader of our blog, you probably already know that Nevada has awarded many cannabis business licenses, but few such businesses are yet operational. Right now there are only six operational dispensaries in the entire state, although three more are about to open. That tells us there are plenty of licenses potentially available for sale. The most current Nevada licensing numbers look like this:

License Type Final Certification Total Awarded Potentially Available
Dispensary 9 55 46
Cultivation 25 182 157
Production 6 117 111
Laboratory 7 17 10

But just because a licensee doesn’t have a final certification doesn’t mean that it is going to be selling. In fact, we are confident that very few Nevada dispensary licenses will come up for sale before the cannabis business attached to the license becomes operational. Many of these potentially available licenses are in the process of seeking final certification and will simply never come up for sale. There are, however, many licenses awarded that will end going to unused either because their owners do not yet realize that they are not going to be able to get operational or because they simply don’t know that they are sitting on a gold mine.

Nevada License Supply and Demand. Right now the supply of Nevada licenses for sale is low while the demand for such licenses is extremely high. Cannabis is not an industry where the supply of business licenses can be increased quickly, so due to the demand, prices for Nevada licenses are high. Right now it’s a seller’s market, and if you are considering selling your Nevada cannabis license, now is the time.

The Nevada License Bust is Coming. Even though right now is a seller’s market for Nevada MME licenses, it is not going to stay that way for long. We have seen what has happened with cannabis license pricing in other states we believe the same thing will happen in Nevada, and fairly soon. Las Vegas residents are all too familiar with boom and bust economics, and they will soon experience the same thing with MME license prices. The main reason we see Nevada MME licenses falling in price soon is because the licenses are provisional. This means that if the license holder does not obtain final certification from the State of Nevada by May 2016, the license becomes nothing more than a worthless piece of paper.

Soon these calls from potential buyers will stop as they will realize that getting state and local approval of ownership and location transfers and building (or building out) a facility will take them take longer than the five months remaining before licenses expires. This seller’s market in Nevada licenses is going to last for only another month or two, if that.

If you’re a potential seller, it’s time to fish or cut bait. It’s time to sit down with your partners and ask if you are actually going to become operational.  If you aren’t, sell now and you can still profit from your investment. If you’re one of those sellers waiting for the top of the market, it’s here and you need to sell before it crashes. Remember, an asset is only worth what a buyer is willing to pay for it, so take advantage of the many investors out there. And if you wait too long, you will get zero.