Is a town in Colorado the first to become a cannabis ghost town? Westword’s Thomas Mitchell reported that the green rush of cannabis business licenses in Colorado left the town of Ordway a “ghost town,” filled with vacant growing operations.

Hasn’t this happened before? Out of the hope of profitable veins of gold sprung boomtowns during the California Gold Rush, a mid-19th century rush of people seeking a fortune from gold. Bodie, California, for instance, soared to over 8,000 people looking for gold until its resources were exhausted. It happened in Colorado, too. Cripple Creek, Colorado soared to over 55,000 people looking for the same. Once the gold resources were drained, people more or less abandoned them, leaving ghost towns.

There’s a new boomtown phenomenon happening right now: cannabis.

Ordway—only a few years ago—was a cannabis boomtown. The town is about 50 miles east of Pueblo in Crowley County, with a population of around 1,000 people. Ordway had 56 active growing facilities at its peak, Westword reports, and around seventy grow operations there were registered with the state Marijuana Enforcement Division by the end of 2022. But recently, there are only about 20 left, according to local licensing officials.

Most of these grow operations weren’t able to survive 2023: From December 2022 to December 2023, the number of adult-use cannabis grow operations saw a 30% drop in the state’s cannabis workforce and a major decline in dispensary sales since pandemic restrictions ended.

Bubba’s Kush Cultivation is a small batch craft cultivator, based in Ordway, focused on providing a clean, consistent, quality product. The team behind Bubba’s Kush is concerned about the future of growing in Ordway.

“I’ve seen equipment left out in fields by people who couldn’t figure it out, and entire crops left to dry outside. No one has to worry about it being stolen. There’s barely anyone here—and what is it really worth, anyway?” cannabis cultivation Bubba’s Kush founder Chris Kaiser asked Westword.

Kaiser said he can throw a rock from his parking lot and hit one of a half-dozen failed cultivations. “That one’s closed. That one’s closed. That one’s closed,” he said. “A lot of people have just up and left. One guy is asking for $1.3 million. Ha—good luck with that.”

He said cannabis operators were promised endless potential for profit in the cannabis industry, but that’s not what ended up happening.

“Even if you’re still open, you’re struggling. Being a cannabis grower was never all it was cracked up to be, but this is getting out of control,” he says. “I guess this is what it takes if you want to win. It’s a tough scene, and I don’t think it’s going to get any easier.”

The price of wholesale cannabis reached record-low prices in Colorado, according to the state Department of Revenue, falling over 56% on average since Bubba Kush’s first harvest in 2021.

Local cannabis activist Mason Tvert admitted not everyone is cut out to survive in the cannabis industry, especially during the past few years.

“It’s been a unique period of time for all businesses, especially cannabis businesses,” Tvert told Westword. “Inflation, COVID-19 and staffing have all created real issues, so I’m not terribly surprised with how it’s played out. Anyone who’s looking at this industry should be wary of the potential for dramatic changes. With something this new and varied around the country, there are a lot of people who just want to open a marijuana store because it’s exciting, fun or unique. As people were doing that, though, we sort of realized that ten years from now they would be owning a liquor store, but with more rules.”

Decline in Colorado Cannabis Sales

The state has undergone a tough period over the past several years. In 2022, High Times reported on the decline in sales.

Sales of both medical and recreational cannabis in Colorado plummeted in June 2022 compared to the previous year, the state’s Department of Revenue reported, an alarming decline that industry officials attribute to a variety of reasons.

Medical cannabis sales totaled $19,235,656 in June—down from $34,534,293 in June 2021. Recreational pot sales, meanwhile, generated $127,157,358 in June—down from $152,719,813 in June 2021.

Colorado cannabis sales continued a downward trend in November 2023 as adult-use and medical cannabis retail locations generated $110.5 million in revenue, the lowest monthly total since February 2017.

Adult-use sales fell to $95.8 million, down around 16% year-over-year, according to data recently released by the Colorado Department of Revenue. Medical cannabis sales in November dropped to $14.5 million, down about 11.5% year-over-year. November marked the fourth consecutive month of a decline in sales in Colorado’s cannabis market, suggesting that the state is headed for its second consecutive year of significant declines in pot sales.

Colorado’s 2023 cannabis sales are on track to reach about $1.5 billion, which would be down nearly 13% from 2022.

Major declines in sales like this have left so-called “ghost towns” like Ordway, full of vacant cannabis-related properties.

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A report, issued on Tuesday by Bianchi & Brandt, “assesses the current mergers and acquisitions environment, reflects on the impact of regulatory changes to federal legality—including access to traditional banking—and takes a deep look at the viability of U.S. cannabis operators and global investors who are fueling the industry,” the Arizona law firm said in a press release.

Titled “A Corporate Law Perspective on The Great Correction in Cannabis M&A,” the firm’s proprietary trend report was “driven by the impactful insights of founding partners Laura A. Bianchi and Justin M. Brandt, who have more than 15 years of experience in the nascent cannabis industry.”

“The Great Correction is really all-encompassing,” Brandt said in the press release. “It applies to the cannabis industry’s initial frenzy of loose valuations with handshake deals that marked the start of the cannabis boom. The industry has since been invigorated by possible reform in cannabis policy at the federal level for the first time.”

The 15-page report opens with a section called “The Green Rush Is Over,” which details the diminishing returns in the once-bullish cannabis industry. The decline, the law firm says, has thrust small and medium sized cannabis businesses into the spotlight when it comes to mergers and acquisitions.

“The economic boom began in 2012 when Washington and Colorado legalized cannabis for adult use, jumped in 2018 when California recreational sales started, and surged dramatically again when legal cannabis was deemed “essential” by many states during the pandemic’s early lock-down phase in 2020. That script has since flipped to a scenario of oversupply, widespread layoffs, investment failures and plummeting stock prices.

The type and scale of cannabis M&As that the industry enjoyed prior to and during the pandemic was “corrected” in 2022 after the recent industry crash, and market conditions have returned M&A activity to a more grounded environment. Small and midsize businesses (SMBs) are now the focus of most of the activity,” the report says. 

But the authors of the report assert that it “is not all doom and gloom,” and “this is not abnormal.” 

“Market corrections are a necessary pathway to the long-term health and sustainability of the cannabis industry—and we’ve been working with our clients and partners to anticipate The Great Correction at hand so we can be prepared for where the market is headed next,” the report said.

A subsequent chapter deals with recessionary fears.

“Despite the old axiom that vice products are ‘recession proof,’ the global inflationary woes and macroeconomic issues the U.S. is dealing with continue to leave their mark on cannabis.

The current recessionary thinking has investors getting cold feet, and those feet are even more frigid when they’re talking about investing in the federally illegal cannabis industry. That illegality translates to limited access to all types of capital—including the most basic banking services, which businesses in other industries take for granted,” the report said. “The failure of Silicon Valley Bank justifiably made headlines and enforced investors’ wary outlook because of the services the bank provided to ancillary cannabis businesses. Their risk-averse or ‘risk-off’ strategy is only increasing the difficulty of raising capital in cannabis.”

Since Washington and Colorado made history by passing recreational cannabis legalization in 2012, dozens of states and cities have followed suit. 

But another chapter in the Bianchi & Brandt explains how regional policy shapes mergers and acquisitions, and that “no two state markets are the same.”

According to the report, factors that may vary from state to state include: “Caps on statewide licenses (including local restrictions) vs. open markets”; “Licensing structures (including vertical or horizontal integration)’; ‘Medical cannabis program requirements’; and “Allowable product categories, including edibles and concentrates.”

The report goes on to provide specific examples across various states. 

“In Utah, licensed medical operators are enjoying great success primarily due to the newness and restricted size of the market. In Illinois, caps on licenses and their scarcity make them highly valued and highly coveted. In a head-to-head comparison, Arkansas’ 38 medical dispensaries servicing its 3 million residents are worth significantly more in acquisition value than Oklahoma’s 2,800 medical dispensaries servicing the state’s 4 million residents. Investors are currently doubling down in Florida, betting on a potential adult-use vote in the coming year or two,” the report said. “New York, which is positioned to be one of the largest cannabis markets globally, is an instructive case of access fueling M&A activity. Capital raises and M&A transactions surged after New York legalized recreational sales. The recent announcement of 1,500 new cannabis business licenses and extended application deadlines will only increase the M&A enthusiasm pervading the Empire State.”

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