Cannacurio #67: What Does It Cost to Buy Market Share in the Point of Sale Industry?

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The past 75 days have seen major turmoil at the top of Cannabiz Media’s point of sale leaderboard, including a board coup, company sale and industry exit. The affected companies control 50% of the point-of-sale market, according to our estimate.

Back in October 2022 we compiled our 5th Annual Point of Sale Report with updated leaderboards. Since then, the cannabis industry has continued to contract, exit deals, and MSOs have closed stores and exited markets. We’ve also seen events in the software space as companies try to adapt:

1. Dutch – Boardroom coup ousted two founders
2. Akerna – Assets sold to Posabit and 365 Cannabis. The price of $4 million equates to approximately $500,000 for each percentage of market share*
3. BioTrack – Sold again, this time to Alleaves. Price of $30 million equals $2.2 million for each percentage of market share*

* Government seed-to-sale contracts have certainly impacted the prices paid.

Here are the numbers and estimated market share from our 2022 report:

Source: Cannabiz Media License Database www.cannabiz.media

We found Akerna’s acquirer, Posabit, in 56 stores in our report, so the combined company will continue to climb future leaderboards even after the divestment of 365Cannabis.

Cannabiz Media has also been tracking the point-of-sale switch for three years. The chart below is cumulative for 2020 through 2022. BioTrack gave up many more seats than it gained, as did MJ Freeway/Akerna. Dutchie is net positive.

Source: Cannabiz Media License Database www.cannabiz.media

Below we show the impact of these steps on industry counts:

Akerna

Akerna had made a number of acquisitions over the years, including Cannabis 365, Viridian Sciences, Trellis, and others (see below). This conglomerate fell apart as a result of Posabit’s recent acquisition for $4 million. That equates to $500,000 for each market share, excluding the seed-to-sale contracts.

This moves Posabit higher in the company rankings as we can add these deals to Posabit. 365 was sold back to the original management team and Akerna received a cash payment of $500,000 and the parties agreed to cancel an earn-out payment due and payable to principals of 365 Holdco LLC with an assumed value of $2,283,806. We featured them in 22 stores or with a 0.05% share.

Source: Akerna investor presentation

BioTrack

Maybe the third time is the appeal for BioTrack? They were acquired by Colorado-based Helix TCS in June 2018. Then, in March 2021, Forian and Helix merged. Less than two years later, they are now part of Alleaves. The purchase price is 30 million US dollars. Excluding the seed-to-sale deals, that’s $2.24 million for each market share.

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Dutch

Dutchie made big news when they bought two leading point-of-sale providers in 2021. The combination of Green Bits and Leaflogix catapulted them to the forefront of the industry. Unlike Akerna, who had engaged in small-scale acquisitions, Dutchie grew up and is considered by some to be the proverbial 800-pound gorilla. Based on our switching behavior data, they seem to win over other providers by offering a one-stop solution.

As we’ve said since our first Point of Sale report in 2018, this industry is ripe for consolidation. Akerna was one of the first to buy up other providers, and now they too have failed. Dutchie bought two of the largest in 2021 and now Alleaves is paired with BioTrack. Last fall, we found 79 POS providers in the US, 53 in Canada, and 15 serving both markets. Some of these companies are very small and will struggle to survive this industry consolidation. Stay tuned as we expect more of these deals to happen in 2023.

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Ed Keating is co-founder of Cannabiz Media and oversees the company’s data research and government relations efforts. He has spent his career working with and advising information companies on compliance issues. Ed has managed product, marketing and sales while overseeing complex product lines in multiple jurisdictions in the securities, corporate, UCC, safety, environmental and human resources markets.

At Cannabiz Media, Ed enjoys the challenge of working with regulators around the world as he and his team gather corporate, financial and licensing information to track the people, products and companies in the cannabis economy.

Ed graduated from Hamilton College and received his MBA from the Kellogg School at Northwestern University.

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Cannacurio is a weekly column from Cannabiz Media featuring insights from the most comprehensive licensing data platform. Check out Cannacurio’s posts and podcasts for the latest updates and information.

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