Weekend Update 🔓
Tidbits from the week that was.
The following is a sampling of Cannabis Confidential content—random paragraph grabs, charts and notes, interesting happenings and other stuff— from last week.
You can click through the title to access any article; most stock stuff is usually behind the firewall + you can access a free trial by clicking below; thanks for your support.
The Hangover
U.S. canna shakes off expiration.
January 22, 2024
Florida Gov. Ron DeSantis (R) said a cannabis legalization initiative will be on the state’s November ballot, predicting a favorable legal outcome for the activists in the Supreme Court in their battle against that Moody A.G. seeking to block the vote.
“I think the court is going to approve that, so it’ll be on the ballot.” -Gov. Ron DeSantis
State Farms
Four states joined the cool canna crowd in 2023—Delaware, Kentucky, Minnesota and Ohio—while several others left it as unfinished business for the new year.
Florida, Idaho, Nebraska and South Dakota are all campaigning to put legalization on the November ballot. Seven other states currently don’t provide citizen-initiated ballot measures so it’ll be up to state legislators to push forward proposals that’ll add to the majority (54%) of American people who already live in a 420-friendly state.
The Supremes
The legal question over the constitutionality of a federal gun ban for people who use cannabis is now before the U.S. Supreme Court. Justices are expected to decide on whether they’ll hear an appeal of a circuit court ruling that found that the restriction violates the Second Amendment.
BTIG on U.S. Cannabis:
“We continue to believe that cannabis will be rescheduled to Schedule III later this year, which should prove directionally positive for operators.”
Correcting The Record On Marijuana Prisoners Left Behind By Biden’s Pardons
Billions
State-led programs are making bank.
January 23, 2024
The Justice Department said that it will be requesting that a federal court dismiss a cannabis industry lawsuit that is seeking to block the enforcement of marijuana prohibition against state-legal activity.
“This step is very much in line with our expectations and we will provide more context from the legal team when we see the response. Standby!” Emily Paxhia of Poseidon
Good Bud Hunting
Massachusetts cannabis retailers sold a record $158.7 million worth of legal cannabis in December, bringing the state’s total recorded sales for 2023 to nearly $1.8 billion.
More than 87% was via adult-use sales, which tallied nearly $1.57 billion last year.
Missouri Tigers
Missouri adult-use canna sales set a new monthly record in December, pushing the 2023 total to more than $1.3 billion. Recreational cannabis purchases were $106.5 million last month, shattering the $98.7 million previous state record set in July.
Missouri has recorded $1.04 billion in adult-use sales since they began last February.
Smile, Carolyn
We awoke this morning to several questions regarding the DOJ’s motion to dismiss, a topic that I'll defer to actual attorneys, who seem united in their view that this was ‘to be expected’ and there’s ‘nothing to see here’:
Shane “Super-P” Pennington of Porter, Wright:
The Garland “memorandum” in the Boies lawsuit is NOT an enforcement discretion memo or “Cole 2.0.” It’s a memorandum of law in support of a motion to dismiss; normal and entirely expected.
DOJ doesn’t announce enforcement priority changes in litigation. It also doesn’t—and can’t—resolve administrative processes pending before subagencies through filings in cases that have nothing to do with those administrative processes. There are no tea leaves to read here, especially lawsuits to which subagencies and their leadership aren’t even parties.
Let’s Get Technical, Technical
Most U.S. canna charts are constructive across multiple horizons but near-term clarity isn't offered on the menu. We’ve been monitoring field positions relative to the Sept. highs and currently only Green Thumb is above ($12) as the rest of FAANG looks up.
Curaleaf Chairman Boris Jordan speaking to the potential tri-fecta of Schedule III, SAFER Banking (+ the Garland Memo IMO) on Bloomberg Radio Monday night:
'I learned Friday this is absolutely in joint committee between the Senate and the House... they're negotiating aspects of bill, looking to bring it in March... I believe that's part of the coordination."
Florida Keys
Lotsa chatter about the potential for Florida to flip green. We’ve mentioned AYR has the most torque to Florida so I asked Josh to show his work. 69.2% of AYR’s current footprint is in the Sunshine State, which is tops across the industry.
Stream Weaver
Watching "Dumb Money" on Netflix makes me wonder what the Reddit crowd would do if they knew how many naked shorts were hiding in the underlying CSE stocks or how market makers have bastardized retail with naked short exemptions + algos.
Circle Smirk!
Everything's funny when making money.
January 24, 2024
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.
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 with 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.
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.
Shine Box
U.S. canna wants your respect.
January 25, 2024
Daily Recap
Two-thirds of voters believe President Biden should accept the HHS recommendation to reschedule cannabis to Schedule III. A whopping 84% of 18-25 year-old voters said the President should accept the recommendation while 13% said he should just say no.
70% of U.S. citizens believe weed should be legal, a record high according to the most recent Gallup poll, which means 30% of this country remains dazed and confused.
Substitute Creature
More than a half dozen U.S. states where marijuana is legal notched record-breaking monthly sales in December, with many new adult-use cannabis markets continuing to expand after American shoppers stepped up their holiday spending.
TD Cowen recently projected legal cannabis sales will reach $37 billion in 2027, up from ~$29 billion in 2023, with at least some of that growth expected to come from increased substitution of cannabis for alcohol, particularly among younger adults.
Why the Long Face?
If you’re new to these parts 1. lucky you and 2. you’ve walked into a unique situation as U.S. cannabis stocks currently can’t be custodied by most U.S. banks and the only NYSE-listed + scaled pipe into the space is the MSOS ETF [CB1 Capital is an advisor].
This is important because if/ as our catalysts arrive, there will likely be a months-long lag until U.S. banks remove the MRB restrictions that’ll allow for the plumbing that’ll facilitate sticky liquidity that’ll get these U.S. pioneers the cap tables they deserve.
The forecast calls for further volatility as our space migrates to an even playing field, complete with capital market access, normalized tax rates and real exchanges. From here to there, we’ll need to horse around so please click here 👇 to better understand.
RIP Mr. Personality. You were one of one. 💔
Jax wasn’t quite right late Tuesday so we took him to the vet, who decided to keep him overnight for observation. We got a phone call early this morning that he died from something called an acute Addisonian crisis.
There are dogs and there are dogs. Jaxie was a dog; he spoke with us daily, kept order in our home and was the best damn bro to Sandy + Bo, who are as gutted as we are.
Nine years young and the heart of a champion; #RIP good boy. 💔
B-Rabbit
U.S. canna tries to flip the script.
January 26, 2024
A majority of American likely voters, including most Republicans under the age of 55, support legalizing marijuana “in all 50 states,” according to a new GOP poll.
The survey found that 57% of respondents favor nationwide cannabis legalization, including 35% who said they “strongly” support the policy change.
Virginia Ham-mering
A Senate proposal to legalize commercial sales of marijuana in Virginia has passed a key hurdle, clearing the Committee on Rehabilitation and Social Services in a 10–5 vote this morning. The bill needs to advance through additional committees in the coming weeks in order to stay alive in the current session.
Quaker State
Five out of six of Pennsylvania’s neighboring states are now 420-friendly. While the Keystone State has had an MMJ program since 2016, there’s a new push in the state legislature to advance adult-use.
“Legal access to cannabis for adults 21 and over helps diminish the illicit market while prioritizing consumer safety, capturing tax revenue, encouraging job creation and investment while correcting the harms caused by the failed war on drugs.”
[OH is green, FL has a path + PA could = a swing-state trifecta in an election year]
Freddy Benson Gomes of ATB on U.S. Cannabis
“Despite a good YTD run, MSOs are trading at only ~8.5x ‘24 EV/EBITDA vs. a high of ~24x in 2021. 2021 was a different world in terms of macro and while it’s improbable (not impossible) we’ll see 20x+ multiples again, there’s room for material expansion from current levels as catalysts are stacking up.
Over the next few months, we expect to see (1) re-scheduling, and (2) FL court approval for legalization making the ballot.
We’re more confident on re-scheduling because the DEA has never deviated from the HHS recommendation, and the timing makes sense given the election cycle. The release of the HHS recommendation a couple of weeks ago + AG lawsuit comments reinforce that view.
While re-scheduling timing is speculative, for the FL court decision there’s a deadline of April 2024 and it’s looking likely to be approved given Ron DeSantis’ recent comments.
You could also get an OH framework soon, some evolution out of PA, NY ramping their market, and movement on SAFER. And in November, a positive FL legalization vote would be an important catalyst for the sector.”
Enjoy your weekend, 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.