The U.S. cannabis industry is highly fragmented, yet at least six acquisitions are languishing in the purgatory of Department of Justice antitrust reviews.

It’s ironic, as there’s certainly no risk of a cannabis cartel forming anytime soon. It’s also one of the primary reasons that many publicly traded U.S. cannabis companies have fallen 40% to 50% from their 2019 highs.

The industry consensus is that the reviews are the result of a government that’s trying to get up to speed on a new industry, rather than genuine concern about a pot monopoly, meaning the stock sell-off may be overdone.

“If you came in with a plastics deal they’ve probably got bios and databases on every plastics company in the history of mankind; you come in with cannabis and they would have no idea how big a company is or what they do,” said Hadley Ford, chief executive officer of iAnthus Capital Holdings Inc., whose recent acquisition of MPX Bioceutical escaped review and closed in February.

Bottomley believes the reviews are keeping some investors on the sidelines, since many of these companies are relying on the pending deals for aggressive pro-forma revenue growth.

However, “we believe the risk of the DOJ taking a hard stance against sector M&A on antitrust considerations is low given the nascent and disaggregated nature of the sector brought on by continued prohibition at the federal level,” Bottomley wrote in a note last week.

He expects the Department of Justice to begin approving deals as soon as next month, with Cresco’s proposed acquisition of Origin House the first to go. “As a result, we believe the closing of sector M&A could be the most near-term and material positive valuation catalyst in the sector for investors to get ahead of,” he said.

Curaleaf is the subject of two separate antitrust reviews for its $949 million acquisition of the Select brand and its $875 million takeover of closely held multi-state operator GR Companies Inc., known as Grassroots.

The cannabis deals that were announced late in 2018 and in the first quarter of this year should begin to receive approval in the fourth quarter, Curaleaf Chairman Boris Jordan told Bloomberg TV recently. However, that wouldn’t include his own company’s acquisitions, which were announced in May and July.

Over at iAnthus, Ford is less optimistic that the Department of Justice will act quickly.

“I can’t imagine any of them get denied ultimately but I think it will be a grinding process while the DOJ gets up the curve at everyone’s expense,” he said.

This article provided by Bloomberg News.