The Calm Before the Storm
Nervous market precedes potential historic change.
Recent Recap
It’s Thirsty Thursday after we limped over the hump to wonder what it’s all about.
The price action is putrid and the breach of the MSOS 0.00%↑ 200-day didn’t help psychology, but binary headlines tend to trump charts. We just need one headline: a ruling on the MMJ stay, federal guidance, clarity on adult-use (or all of the above).
Jushi and Tilray reported this week and the first was solid, with record wholesale revenues as they ready for Virginia to flip the retail stores switch. The second was mixed if not muddy, with alcohol and cannabis creating a two-headed monster.
Sundial also reported and while the reaction was uninspiring, they’re set to become the first U.S. plant-touching listing on the NASDAQ (post-Parallel). This is one to watch, although our favorite risk/reward at these levels remains VFF 0.00%↑.
Earnings continue next week with Green Thumb on Tuesday, Verano and Curaleaf on Wednesday, and Cresco and TerrAscend on Thursday, with Village Farms releasing on August 10th, which will be a special day for the sector, and MSOS in particular, as the ETF will be ringing the NYSE opening bell.
Random Thought
Expecting decent prints, not that anyone will care; we need clarity on MMJ and a 280E back-tax vacation as we await the AU process completion.
Housekeeping
I’ll be in Ohio August 17 to dine with VEXT CEO Eric “Big O” Offenberger, and after that, I’ll be attending the LEEF Investor Day Oct. 21-23. It’s the people and products that make this industry unique and there is no substitute for hugs and handshakes as we dig deeper into these companies.
Top Stories
Bipartisan Senators File Federal Bill To Protect Insurers Serving State-Legal Marijuana Businesses
Adult-Use Cannabis Legalization Increased Agricultural Employment By 9%
Fetterman: ‘I’ve Always Been Very Pro-Weed’
Big Cannabis Has Cozied Up To The GOP
Teen Marijuana Use Fell More Than 60% From 2013 To 2025 Despite Legalization
Where Is Cannabis Legal? A Guide To All 50 States
Texas Ban on Delta-8 and Other Hemp-Derived THC Products Takes Effect Friday
Athletes Use Cannabis In Silence: What This NFL-Backed Study Revealed
Federal Data Shows More Americans Use Marijuana Daily or Almost Daily Than Cigarettes or Alcohol
Industry Headlines
The cannabis CEO behind a $2.1 billion sale bets again, but smaller
LEEF Brands Announces US$5.2 Million Preferred Financing to Purchase Processing Facility
FLUENT Announces Definitive Agreement to Sell New York License
Vireo Growth Inc. to Acquire Planet 13 Holdings Inc.
CB1 Capital - 5 Questions w/ Village Farms COO Ann Gillin LeFever
AlphaNooner: CB1 Capital partner Loren DeFalco talks policy and process.
Chart Check: Glass House
GLAS 0.00%↑ the forced warrant conversion maybe in play but only time (and price) will tell. When the regulatory rails are set, big tobacco will have stars in their eyes for this California unicorn as long as out-of-state (country) distribution becomes kosher.
CGF on U.S. cannabis
In the quarter, there were markets that had a surprising wind in their sails (Cali, NY, and Ohio), and others only seemed to catch a puff. It’s worth highlighting while promotional intensity remains elevated, it appears to be easing in key markets on improving supply-demand dynamics and increased pricing discipline.
We expect that, absent Congress extending the current hemp ban past Nov. 12, ‘26 consumers will pivot back into the legal cannabis channel, which is, at a minimum, supportive of further moderation of promotional intensity through H2/26.
Key market’s performances: California’s surprising strength sequentially and relative to the year ago quarter, with growth of 9.4% and 8.2% respectively is only relevant to Glass House. The strength of New York, with a 13.4% sequential increase, and Ohio with a 16.1% increase sequentially, despite tough year-ago comps, was a positive surprise in the quarter. In addition, several other markets posted mid-single-digit increases, on low-single-digit year-prior comps. On the flip side, Arizona and Nevada remained weak on easy comps.
Regulatory roundup: While the DEA’s marijuana rescheduling hearings concluded on July 15, 2026, the market continues to wait on the recommendation of the ALJ. In parallel, petitioners are actively challenging the April 23, ‘26, order rescheduling MMJ to Schedule III. Their argument: DOJ violated the Administrative Procedure Act (APA), in part by issuing the order without notice-and-comment rulemaking or an administrative hearing.
Valuation: The large-cap MSOs (including Curaleaf) are trading at 5.9x 2026E EV/EBITDA. The group, excluding Curaleaf (which, due to its market leading international business, commands a premium), is trading at only 4.4x, versus tobacco and beverage peers at 11.5x and 8.6x, respectively.
The space remains cheap, in our view, despite a slew of material catalysts through our forecast window, including: (1) rescheduling and its derivative positive impacts, including the resolution of custody issues; (2) major banking reform (SAFE); and (3) an accelerated pace of uplisting to major exchanges.
AGP: 2Q26 Thoughts & Preview
We expect the 2Q26 earnings season to hold an upbeat tone from operators with Hoodie Analytics +6% QoQ sales for key states implying some upside to MSO guides of flat to up LSD (on organic basis). Additionally, we expect operators to be optimistic on federal momentum with two plant-touching operators having uplifted to the NYSE since 1Q26 earnings and the ALJ hearings now complete with Phase II (whole plant) rescheduling potentially coming to fruition in the Fall.
As such, we’ll be looking for commentary on management expectations for Phase II rescheduling and the anticipated impacts on their respective adult use businesses - particularly if they believe additional reform will be needed to access capital markets similar to medical in Phase I.
With the intoxicating hemp ban that becomes effective Nov 12 approaching, we’ll be listening for operators expectations for the ban to be delayed/amended - and what potential benefit could come for the legal market if it does become effective. International is also expected to be a highlight for Canadian LPs and Curaleaf (TSX: CURA, Buy), with Canadian exports to Germany continuing to grow, though regulatory restrictions remain a risk.
For a deeper discussion regarding our thoughts on the US, Canadian, and international markets, along with hemp, please see our recently published 2H26 Outlook (here).
Stems & Seeds
Genetics are the cannabis industry’s greatest asset – act accordingly
Have a safe journey, 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.
Have not heard anything smart about how the reschedule schedule, and all the subsequent dominos, will likely be impacted if Blanche goes down the drain he is circling. Yes, "strange bedfellows" aside, rooting for Blanche does sit well with me. I have a daughter. Enough said.