Jump Ball
Youth, minority votes up for grabs.
Daily Recap
A sixty-day public comment period for the DOJ’s proposal to reclassify marijuana from Schedule I to Schedule III in the Controlled Substances Act closed on Monday night.
Nearly 40,000 comments were submitted by various groups, agencies, organizations, academics, and concerned citizens—with an overwhelming 91% of the comments in favor of rescheduling or making cannabis legal under federal law, per Headset.
If that ridiculously high level of support sounds somewhat familiar, it should: in 2022, a Pew Research poll found that an overwhelming share of U.S. adults (88%) believed that marijuana should be legal for either medical or recreational use.
What’s Next?
The next move by the DEA is to sift through the comments to see if any of them raise “significant” legal or factual questions, per attorney Shane Pennington, who believes the DEA will likely find it necessary to issue some responses to certain comments.
The DEA will then decide if they need to hold an administrative hearing about the rule and if not, they would publish the final rule in the federal register. Once published, a 30-day window will open for 🤡 opponents who wish to file suit against the move.
“At any point before there’s a final rule, they could issue a notice that they’re going to have a hearing. They might not—no one knows, outside of the government. Until we get a final rule, we won’t know if they’re going to have a hearing.” -Sugar Shane
Scooby Doobie Do It
A Senate committee has scheduled a vote on a newly filed bill to limit the ability of federal agencies to use past marijuana use as a factor in making employment and security clearance decisions, titled the Dismantling Outdated Obstacles and Barriers to Individual Employment, or DOOBIE, Act.
This represents the latest attempt to ensure that a person’s eligibility for the federal workforce isn’t negatively impacted because they’re previously consumed cannabis.
Doctor, Doctor
The 161,000 member American College of Physicians published a position paper that calls for "the decriminalization of cannabis and protections for physicians that want to prescribe cannabis.” That’s probably because they followed the science.
Stocks & Stuff
I’m hitting the send button midday as I head to the airport for a trip to Nashville to support Tempters as they sponsor the Karate Combat Championships.
As a reminder, “TODD24” will get you 25% off your first order and “TODD” will get you 20% off after that—I lobbied for the latter—and you can order those bad-boys here.
As I pull the plug (12:45PM), the S&P is -100 points, the NASDAQ 100 is -600 and U.S. cannabis ETF MSOS… is up a nickel. Relative strength begets actual strength but the buyers are higher, as in, above the 200-day moving average in and around $8.
Below, we’ll chew through the state of play, check debt levels and talk through relative multiples at different junctures in the cannabis death march lifecycle as we countdown the days to the election and the catalysts presumably contained therein.
SPY 0.00%↑ QQQ 0.00%↑ IWM 0.00%↑ MSOS 0.00%↑
Top Stories
The DEA marijuana rescheduling comment period is over. What’s next?
Kamala Harris is First Presidential Nominee to Back Marijuana Legalization
Is hemp the enemy of Florida’s adult-use marijuana initiative?
Thailand to legislate medical marijuana, signals no re-criminalising
Industry Headlines
Weedmaps Partners with NuggMD to Launch Medical Cannabis Card Program
Todd Harrison on Chigirl Spaces today (worth a listen) 🎙️
Political Football
Kamala will be the first major party candidate to back the full legalization of cannabis as such, the youth and minority votes have become a jump ball.
After using cannabis as both the carrot and the stick for years, however, most industry stakeholders have understandably been underwhelmed by the Blue Crew.
Team Red has a decision to make and as shared in this space, the only savvy political move, given it’s popularity and polling in swing states, is to bogart, rather than block, the issue. How, you ask? All the GOP nominee would have to say is:
"Cannabis, like abortion, should be left to the states but U.S. companies should be able to keep their money in U.S. banks and be listed on U.S. exchanges,” adding language around clemencies and criminal justice reform.
States' rights is right down the middle of the GOP fairway, as is economic strength and American jobs, and simply saying something like that, be it at a debate or a rally, would have the added benefit of stealing Schumer’s thunder after years of inaction.
For what it’s worth and spoiler alert: President Trump pardoned Weldon Angelos and is prominently featured in Weldon’s soon-to-be-seen-everywhere documentary, Unlikely Allies—and If I'm being honest, he came off looking like a champ.
Maybe that's why I'm in the bogart-over-block camp: I see the history, respect the relationship and, after speaking with several higher-ups within the red tent, sense they’re aware of how popular this issue is polling among young/ minority voters.
And that was before the pot pivot we saw earlier this week.
Viridian on U.S. Cannabis
There is certainly a path that says it is all wrapped up and in effect prior to the election. However, the overall equity price levels tell us that rapid timing is far from being the base case. Otherwise, we think we would have seen more improvement.
Our best advice is to focus on the fundamentals and invest in companies that do not need S3 to achieve positive operating cash flow. Still, the graph below shows that dramatic gains are still likely.
ATB on U.S. cannabis Debt
Over the next couple of quarters, we expect certain MSOs to refinance a significant portion of their debt as maturities approach. Ascend opened this refinancing season by extending its 8/25 maturity to 7/29 at a yield-to-maturity of 14.25% (interest rate 9.5% ->12.75%), which indicates an elevated cost of debt in the sector, especially considering there is no interest tax shield benefit as 280E remains in place.
Despite this cost, the market reacted positively to Ascend’s refinancing (+18% vs. 3% for MSOS) since the announcement on July 15. Similarly, we believe that successful refinancing of TerrAscend’s and Jushi’s debts could serve as catalysts for the stocks.
There is a larger maturity wall coming due in ‘26 for names such as Verano, Curaleaf, Trulieve, Cresco, and Ayr. We believe refinancing those maturities will become a key investment theme in ‘25 as companies await a more favorable debt market and cash flow improvements from rescheduling and other catalysts (e.g., FL and PA).
Stems & Seeds
Regulatory Framework for Cannabis: A Position Paper From the American College of Physicians
Lesser-Known Marijuana Components Can Be ‘Promising Anticancer Agents
Have a safe journey 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.