The following is a sampling of Cannabis Confidential and if any of it speaks to you, please join us for a free trial when done.
Another One Bites the Dust
More U.S. canna coverage gets pulled.
October 16th, 2023
With every one of Virginia’s 140 legislative seats up for election next month, Old Dominion, the Mother of States, will elect a new cast of characters that’ll control the House of Delegates and Senate—these are the folks that will dictate cannabis policy in the commonwealth for the next few years.
“The fate of cannabis policy in Virginia will absolutely be determined by the outcome of this November’s election,” the regional NORML president told Marijuana Moment, “Marijuana is on the ballot in 2023.”
[Ohioans go to the polls November 7th and the oral arguments in the Florida SC case will be heard November 8th; Virginia, like Pennsylvania, will be a year-end wildcard]
Missouri legal cannabis operators are ringing up $100M each month in sales. The Show Me State has showed us the money since adult-use flipped the switch earlier this year; adult-use revenues soared from $72M in February to $97M in August.
As New York opens its marijuana market to larger competitors—GTI, Cresco, PharmaCann, among others, could be on shelves by December—retailers fear being squeezed out. I would remind them that the RO’s (MSOs) need genuine, authentic, legacy vibes to survive in the big city, and “we + how” > “us vs. them.”
If the chatterheads are right and SAFER hits the Senate floor by the last week Oct/ first week Nov; if a private lender (who shared an off-the-record non-corroborated private conversation with a Senator in a manner that would benefit his own book) is to be believed, we'll need clarity in the House first, which could take time.
Growth investors were burned when companies swapped CAPEX for cashflow; value investors were chased by the perception of value traps given the lack of visibility on CF; retail investors are shadows of their former selves after 5 years of playing piñata.
The resulting M.O has been “show me, then show me more; and then you’ll need to really show me” as it pertains to unlocking this space and allowing the investment universe access and custody (← the pipes necessary for liquidity).
WWIII stuff seemingly throws a wrench in the timing—or duration—more than the destination. We just gotta get there, and remain vigilant as this latest version of our unsure world will likely have more headline risks and trap doors than most.
We’ve discussed how the lack of progress in DC, most notably around the inability to pass SAFE banking two years ago, has cost this industry things we can measure—like 5% in the two-year note, to pick a fixed-income proxy—and things we cannot, like the time value of offering research to institutions without attendant banking revenue.
BTIG, Cowen, Cantor, Piper…there are more but you get the gist.
Jordan Shoots his Shot
The Ohio Republican came up short.
October 17th, 2023
Rep. Jim Jordan failed to garner enough votes in his first attempt to win the gavel as Speaker of the House. The Republican from Ohio has never been an ally to cannabis although he did get votes from several notable 420-friendly conservatives.
MJBizDaily interviewed a top cannabis attorney to explore what the end of 280E might mean for cannabis business taxes and he listed several potential implications:
Past taxes paid under 280E are unlikely to be refunded.
Unpaid past taxes due under 280E would probably still be owed.
If rescheduling is completed sometime in 2024, it’s possible that 280E taxation on the cannabis industry could end retroactive to Jan. 1, 2024.
[state-legal cannabis companies paid an extra $1.8B+ in taxes in 2022]
4Front Ventures Secures US$10 Million Credit Facility
Must-follow Jungle Jane offers this factoid below and she shared her interpretation of what those big-ass after-hours blocks were yesterday:
There are parallel pluses to the process currently underway: the big boys (tier 1’s) will see the biggest benefit when 280E vaporizes…
…while some (but not all) on the back half of the MSO totem pole will see more upside torque as visibility evolves on cash flow generation and/ or balance sheet optimization.
2024 is setting up to be a big year for U.S. canna but we gotta get there; my biggest nit is that the only path to lower rates would likely entail a (much) lower stock market.
House Arrest
D.C. dysfunction continues apace.
October 18th, 2023
Rep. Jim Jordan (R-OH) took another stab at the gavel today and again came up short, receiving 199 votes, or 18 shy of what’s needed to be elected Speaker of the House. The next vote is expected to be held tomorrow.
Rep. David Joyce (R-OH) is expected to file a motion to elect Sen. Patrick McHenry (R-NC) as a permanent speaker pro tempore. While McHenry flunked flank, many believe he understands the need for SAFER Banking and that his concerns were addressed by the senate committee. Joyce, of course, is the lead sponsor of SAFER Banking.
New York State will license five new marijuana dispensaries to open, part of an effort to keep up with growing demand and out-compete the illicit sellers, according to the state’s cannabis regulator. The agency said it will step up enforcement of $20,000-per-day fines on unlicensed stores, while extending its deadline for license applications.
A majority of voters from almost every demographic in Ohio support passing Issue 2, a citizens’ initiated measure to legalize and regulate the possession, home cultivation and retail sale of cannabis for those age 21 or older, according to the statewide polling data released today by Baldwin Wallace University.
The German federal parliament deliberated on a bill that was proposed by the federal government on controlled cannabis usage and related provisions today. The move is endemic of significant shifts in the country's stance towards the substance, which is currently illegal for recreational uses.
U.S. canna was firm out of the gate, rallying almost 4% before a large seller emerged to slap 2.6M MSOS on the tape at lunchtime to turn the tide. MSOS—which again, isn’t the space, just a NYSE-listed proxy thereof—reversed 12% to a fresh October low and breached the 50-day on the close. Volume upticked vs. thinner levels in recent selling.
Some have speculated SAFER would see senate floor time by the first week in November but the question now is whether the wars abroad will play the same spoiler role as Silicon Valley Bank did in the Spring.
Three schools of thought: 1. the Senate will lead by example/ govern; as SAFER is a Schumer priority and already through committee, it’ll pass, which puts it in play once the House is in order. 2. Schumer wants it but the senate GOP balks (optics); possible/ hard to discount. 3. Priorities shift given macro and we (they) suck again.
House of Cards
Congress tries to come together.
October 19th, 2023
Punchbowl News reported that Jim Jordan (R-OH) would not hold a third ballot for speaker and instead will back Patrick McHenry (R-NC) as an interim speaker until January. As discussed yesterday, this would be a net positive for SAFER Banking…
…but it will require support from both sides of the aisle. The situation is fluid and it remains to be seen if a coalition can be agreed to—but we do know one thing: if this gets done, Dave Joyce (R-OH) will have been the driving force, which would be good for Team Green.
My biggest concern of late is that rates continue to rise despite the escalation in the Middle East. What should be a flight to quality in the bond market isn't, which might be the market trying to tell us that energy prices could be going much higher.
[Iran is the wildcard. The Strait of Hormuz is among the world's most important oil chokepoint as oil tankers carry ~17M daily barrels, or 20-30% of world consumption]
Freddy Benson Gomes of ATB on Ohio:
Solid color on Gary U.S. Canna Bonds courtesy of Jason Mooney at Echelon:
STUDY: "participants displayed reduced anxiety at month 3 of post-medical marijuana treatment initiation," concluding that the results "support the use of medical marijuana as a treatment for anxiety and PTSD."
[note: there was no Cannabis Confidential on Friday, October 20th as I was traveling]
Enjoy your weekend and please remember to enjoy responsibly.
/end
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.