Trulieve Cannabis (TCNNF) -) investors better hope the company did its due diligence before its acquisition of Harvest Health and Recreation.
The multi-state cannabis operator agreed to acquire the company for $2.1 billion in May, marking the biggest tie up in industry history.
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But years before it would be acquired by Trulieve, Harvest made another deal with the town of Hancock, Maryland that is now set to go to mediation.
In 2015, the town of about 1,500 residents entered into a unique public-private partnership, legalizing cannabis production in the town years before the state would make possessing recreational cannabis legal in 2023.
Harvest was able to secure a medical marijuana license in Hancock in exchange for a 4.99% equity stake and rental of an old manufacturing facility owned by the city, the Washington Post reported.
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Now that Trulieve has purchased the company, the fight over exactly what the 5% entails is headed to mediation after the two sides could not agree on what "5% of the profits" means.
“We get 5 percent of the profits, and quite frequently in these types of arrangements, there’s a bit of a disagreement on what constitutes a profit,” Town Manager Michael Faith said during a recent Facebook chat with residents, the Post reported.
Faith told the paper that Hancock has received a little over $703,000 as part of the deal, and in a previous round of negotiations, the city pushed for $50,000 in annual payments.
Meanwhile Steve White — currently the president of Trulieve, previously the CEO of Harvest — says that the company has not only made direct payments to the town of Hancock, but also support for "the ecosystem (restaurants, gas stations, etc) that keeps a small town like Hancock alive," according to the Post.
But that's not enough for town officials who want a full accounting of the company's profits and is willing to go to mediation to get them.
Trulieve shares were down more than 4% at last check in late afternoon trading Thursday.
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