Circle Smirk!
Everything's funny when making money.
Daily Recap
The Department of Justice asked a federal court to dismiss a cannabis industry lawsuit that seeks to block the enforcement of marijuana prohibition against state-legal activity—in part, it says, because the court should not get ahead of a possible cannabis rescheduling decision that’s being considered. 👀
Law School
A Pennsylvania district attorney and gun rights advocates have filed another lawsuit in federal court seeking to overturn the ban preventing medical marijuana patients from buying and possessing firearms, the latest in a series of legal challenges to the policy.
This comes as the question over the constitutionality of the federal gun ban for people who use marijuana is now before the U.S. Supreme Court, which is considering taking up the issue.
Duber?
Uber and the office of Colorado’s governor are among those who’ve disclosed federal lobbying on marijuana reform legislation this past quarter.
This appears to be the first time that the ride-sharing company has been involved in federal marijuana lobbying, after a report showed advocacy for the bipartisan SAFE Banking Act that has been floating around the Hill since the Spring of 2017.
Wooo Pig Sooie
On the heels of a record $283 million in state medical marijuana sales, advocates are seeking to get a constitutional amendment on the Arkansas ballot that would relax state laws and open up the industry.
Axios has reported that Arkansas Attorney General Tim Griffin is expected to provide feedback on the proposed amendment language on Monday.
Baked Hot Potato
U.S. equities continued their historic rally to new all-time highs—this is nothing new, of late—but today, U.S. cannabis hitched a ride to the upside, which is a bit of a tone change for this former fan fave that’s been looking pa nub in all the wrong places.
Below, we’ll dig into the why behind today’s heavy lift on strong volume, revisit the reasons the space trades as it does, see why short people have no reason, look at a few big board ancillary rentals and otherwise recap everything you need to know.
All that and more, just scroll down.
SPY 0.00%↑ QQQ 0.00%↑ IWM 0.00%↑ MSOS 0.00%↑ PT Notional: $176M ($109M)
Top Stories
Pennsylvania District Attorney Sues Federal Government Over Gun Ban For Medical Marijuana Patients
The implications of federal cannabis rescheduling
Missouri cannabis sales near $2 billion at close of 2023
Massachusetts cannabis companies lead legal fight against national prohibition
Group proposes easing access to medical marijuana in Arkansas after record sales
NY home growers could possess 5 lbs. of recreational marijuana under new rule
Marijuana MSOs focusing on wholesale growth in 2024
This California pot company was once valued at $1.6 billion. Now it's worthless.
Flashback
Early this morning on a whim, I went to look up my first boss on Wall Street; when I Googled his name, it took me here, an article written 24 years/ another lifetime ago; it took me back to a simpler, albeit sometimes erratic stretch of my life, pre-9/11.
These days aren't as simple—the process of U.S cannabis onboarding as a legitimate asset class has been complicated, frustrating and demoralizing. The 2018 repeal of the Cole Memo started a multiyear devolution that froze-out U.S. cannabis plant-touching companies from U.S. capital markets.
It started with Pershing in 2019, continued with J.P. Morgan and then virtually every other financial institution here and abroad, including UBS and CS. With only a small subset of holders and no risk of an institutional squeeze or a takeover bid, the bears have brutally abused the bulls for three years using algos, spoofing and naked shorts.
Ironically, I believe the opportunity now is as great or greater than it was when that article published in April Y2K—we just need to well-prepared and the only way to do that in a way that’s sturdy and sustainable is to take this journey one step at a time.
Today’s Tape
We chewed through the charts and set-up yesterday so will keep today’s recap tight.
The primary takeaway from the DOJ response, which hit last night after the close, was that they told us that the DEA decision is forthcoming. Punchbowl broke the story that a review was in motion Jan. 3rd—which wasn’t actually news to anyone following this, mind you—but this was the first time that the government said as much.
Volumes arrived early—yes, it’s all relative—and we skipped our usual lunch crunch, which was also a tone change.
MSOS traded as high as $9.24 in late afternoon trading, touching the top-end of the uptrend channel that’s been in place off the lows, before settling just below the Sept. highs ($9.12 on a closing basis; $9.87 intraday).
Speaking of which, in our FAANG review yesterday, we monitored relative strength as defined by proximity to the Sept. highs. Among the bigger names, Green Thumb was all alone north of the tracks but today, Verano + Trulieve (both big FL) joined Big Ben.
$182M total notional plant-touching volume traded in the regular hours, $109M of which was the ETF. Peanuts in the grand scheme of capital markets, of course; but that’s sorta the point.
btw, MSOS +50% vs. late December and still -84% vs. the good ol’ hashtag days.
Zoom Out
MSOS weekly lens on a closing basis. Yes, there was dilution on the way down but we also know volume precedes price and seismic shifts are afoot.
VRBO
I asked research to find a few ancillary rentals on the big board (99% of investors don’t know about MSOS, much less the underlying names) —you know, the GRWG 0.00%↑ -types—and they hit me back with this, which was first filed on January 16th:
Billionaire founder of $10b AUM investment fund Raptor Group filed a 5.3% position in WM Technology MAPS 0.00%↑
Three Amigos
We continue to believe that the plan is for a trifecta of positive catalysts—Schedule III, the Garland Memo and SAFER Banking—before the election, which infers that the process better get some giddy if that’s gonna have a chance.
There have been so many false starts through the years; the question, I suppose, will be if those efforts prove cumulative, or if D.C. is truly a lost cause.
Little People
Shorts have been rewarded for fading any semblance of optimism over the last 1078 days; no shocker Pavlov's pups are punting anew—but if any our our amigos come knocking, the four most dangerous words in finance could actually prove true.
I Love a Parade
Green Thumb will report Q323 on Feb. 27, Verano reports Feb. 28... the line-up has started taking shape. We know that most Q4 top-line results are expected to be down mid-single digits, per guidance, but that’ll also depend on where their footprints fall.
Freddy Benson Gomes of ATB on U.S. Cannabis:
From a smart options desk this morning:
08:38:17 MSOS - all that mattered in the DOJ response to Boies lawsuit was the fact they said ‘just wait until the DEA has finished their review.’ Nobody would be surprised if DEA rule proposal came by Apr, the plaintiff response (Mar 15th) + additional reply (Apr 5th) in Boies lawsuit provides helpful bookends on timing IMO
Add 4/20 and some press reports of SAFE in joint committee b/w House/Senate looking to bring in March, I continue to think owning May is the best place to be in the trade, while anything in the short term bid in the 110-120 vol range depends.
We continue to like selling Feb 9th 8 puts to buy May 8 7 put spreads...
Stems & Seeds
Cannabis came in dead last across all time horizons in overdose deaths…
Six bartender bibles for cannabis drink and mocktail enthusiasts
Enjoy your night, be safe and please enjoy responsibly.
If you’d like to help Mission [Green] change federal cannabis policies, please click here.
CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice.