Soldier Field
Canna consumes Chicago.
It’s no secret that the cannabis sector is in a brutal bear market. The U.S. cannabis ETF MSOS 0.00%↑ topped out north of $55 some 1,338 days ago—February 10, 2021— and its been a hella long journey to current levels, under $7.
The fact that risk assets have been on fire adds insult to injuries, many of which have been self-inflicted. I once mused that a man could hold his breath for a minute under five feet of water but could not do so for five minutes under a foot of water.
The U.S. cannabis industry is going on five years without any access to oxygen capital market and that’s while paying a 75% effective tax-rate or before factoring in any number of plot twists, including but not limited to the proliferation of hemp.
As I made my way to Chicago on Monday morning for the BZ Cannabis Conference and Hurricane Milton strengthened along the Gulf Coast, I was reminded of how many unique variables impact this industry as it remains trapped in a quasi-legal purgatory.
Patrick Lane of Benzinga, M.C of these events, told me he was expecting 2000 people this week, which would be an all-time high for Chicago (BZ Miami attracted closer to 2500 people in the Spring). That’s a lot of people, for a bear market, in this economy.
The first official order of business was to tour the new 4Front facility in Matteson, 45 minutes from downtown Chicago. About 20 of us boarded a bus to get a closer look at what all the excitement was about and we were not disappointed.
The place is massive. 16,800 sq. ft. of flowering canopy is online now, 34,800 sq. ft. will be up mid December with new genetics dropped along the way. They expect to push out more than 3,000 pounds of dried, cured biomass monthly by year’s end.
The Magnificent Mile
The conference began Tuesday morning and as I made my way around breakfast, it was great to see so many familiar faces. The greetings were like running into an old friend at a funeral. “Great to see you—sorry it had to be under such circumstances.”
The U.S. canna Facts Aren’t Insults Tour has been going strong since the Spring with all the uncertainties surrounding the timing of federal reform and the implications of the upcoming elections. After so many false starts and empty promises, FOMO is no mo’.
As I waited for Emily and Jason to step on stage, I kept thinking about the parallels to Y2K. Everything they said technology would be ultimately proved true, but not before a massive crash. Remember John Chambers and the show me economy? That’s U.S. cannabis right now: show me, or shut the fuck up.
We know that with U.S canna ETF MSOS under $8, the chart remains vulnerable, if not broken. The upcoming earnings reports won’t be terribly impressive either, nor will the next, at least for operators with a large Florida footprint (prayers).
Still, as narrative chases price, I can’t help but wonder if this is the denial that precedes migration and panic in every market cycle. We know that a move through $8.20 would trigger a technical breakout (migration) and from there, I guess we’d see.
[in Y2K terms, that would likely put us in late 2002 or so, but it would likely be catalyst-dependent; remember, this is the first year in five there isn’t rampant year-end upside speculation; if we end up getting S3/SAFE/Garland (+FL), we goin’ Sizzler]
JW and E-Pax, along with Tim Seymour, walked through the David Boies lawsuit that aims to not only end 280E but recapture past payments. The conservative court works in the industry’s favor, they said, as does the Chevron ruling, and they are anticipating this could be in front of the Supreme Court by next Summer.
Curaleaf Chairman and CEO Boris Jordan spoke next, highlighting challenges and opportunities for the space. He fingered hemp-derived cannabinoids—a market he estimates has a $20-$25 billion annual run rate—as an industry growth bogart.
BoJo also said broader macro pressures have likely ushered in a consumer recession, if not an outright recession, and that Hurricane Milton might influence the election if an abundance of people are displaced.
I picked up a few interesting tidbits during the NCR roundtable with former Sen. Cory Gardner and former Rep. Dave Perlmutter. Both were optimistic that SAFER banking could get done in the lame duck session this year but only if neither side sweeps.
There was also some talk a final S3 rule might arrive by the time Biden bolts, and while that sounds optimistic, we’re told we’ll hear who is granted a hearing a month prior to the scheduled date. For our purposes (Dec. 2). that would be days before the election.
I skipped most of the afternoon speakers as we were hosting the BZ Executive Dinner on behalf of Mission [Green] and those bags weren’t gonna stuff themselves. Shout out to MVP Patrick Lane, who once again did most of the heavy lifting.
Be the Change You Hope to See
We loaded our loot into an Uber van and made our way to RPM Events…
…which is a stunning indoor-outdoor venue situated directly on the Chicago River.
That’s where I met a man that changed my life: Cameron Clarke, CEO of Kanha.
I’ve been around the cannabis block a few times and while I’m a fan of the occasional novelty item, I’m a pretty hardcore flower guy when push comes to shove. I like what I like and I like it a lot. In fact, there may only one thing that I like more than weed…
…and that’s M&M’s. So when CC handed me a fist full of infused M&M-like candies, I felt like the proverbial kid in a candy store, before I realized that I had to slow my roll.
As the night took shape and the music filled the air, I couldn’t help but appreciate the human capital in the room. This isn’t an easy space to navigate, as an operator or an investor, but there was a steady determination that belied the overarching angst.
Behind all those great products are some pretty remarkable people, and they we rely on this industry finding its footing. It shouldn’t be this hard, not for a product with a 91% approval rating that generates billions in tax revenues and employs 450K citizens.
Yet, somehow it is.
It was terrific to see the industry leadership—fierce competitors on all other days—convene behind the shared vision of affecting positive change for the U.S. cannabis industry and yes, to help get people out of jail for this plant.
Thank you AdvisorShares, Associated, 4Front Ventures, Alliance Global Partners, ATB Financial, AYR Wellness, Benzinga, C21, Cresco, Curaleaf, Curio, Cannabist, Foley Hoag, GrowGen, Khana, Mattio, Missouri Health & Wellness, Pharmacann, Poseidon, Skyvest, Village Farms, Speedwell, Trulieve, Verano, Glass House, Gerber Kawasaki, Serenity Capital, Ensemble Brands, Hadron Capital, U-Bet Advisory, Turning Point Brands and A2C for your contributions to the space and efforts for the industry.
The usual Cannabis Confidential cadence will return next week. 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.