Weekened Update Unlocked
Reviewing the cannabis landscape.
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 the title to access any article; most stock stuff and analysis is behind the paywall and you can access a free trial by clicking below; thanks for your support.
Note: there will be no Cannabis Confidential this week as we celebrate America.
Victoria's Secret 👈
Cannaland makes a stand.
June 24, 2024
Ohio cannabis regulators have approved dozens of provisional licenses for existing MMJ operators to convert to dual-use licenses, setting the stage for an immediate launch of the state’s recreational market. As of Friday, the DCC has signed off on 62 provisional dual licenses for dispensaries, cultivators, processors and testing labs.
“We’ve worked with municipalities all over the country and Ohio seems to be working lightning-fast, issuing provisional licenses a week after applications submitted. We’re ready to flip the switch and welcome people to our stores.” -Jason Erkes, Cresco Labs
Steeler’s Wheels
Pennsylvania lawmakers have signaled that a bill to legalize adult-use cannabis could advance imminently as there are only a few differences remaining between the House and Senate proposals—as they keep close tabs on neighboring Ohio’s progression.
A PA state representative said there was enough alignment between each chamber’s reform measures to move before a deadline this week. “Our goal is to get this done as soon as possible… and as part of the governor’s budget proposal.”
Florida Lottery
Smart & Safe Florida raised over $40M with the election still five months away. That means the committee has officially surpassed the fundraising of California’s Prop. 64, which held the record as the most-funded adult-use cannabis legalization measure.
In terms of Florida’s footprint, Trulieve recently opened its 200th store, Verano has 77 dispensaries under the MÜV name, Ayr Wellness has 64 stores, Curaleaf has 62 stores, Cresco Labs has 33 stores and Green Thumb just opened its 17th store in the state.
If you can’t beat ‘em…
Curaleaf Holdings, a leading international provider of consumer cannabis products, announced the launch of an all-new line of hemp-derived THC products under the company's Select and Zero Proof brands.
Products will be available direct to consumers on Wednesday via the company's new online storefront, which is Curaleaf's new home for all fully Farm Bill compliant hemp-derived products. Shipments will begin on July 1, in time for Independence Day.
Alice and Sam, sitting in a tree
On a housekeeping note, I still haven't back heard from Stripe after they rejected my three responses stating that my content didn’t actually violate their terms of use….
…and while I’m hopeful a reconciliation is forthcoming—first amendment and all—I am planning to spend time with my family next week during the 4th of July break so we’ll figure all this out once I return.
Beacon on Rescheduling: No Standing Zone
Smart Approaches to Marijuana asked for the public comment period be extended 30 days beyond the current date of July 22nd and filed a request for a hearing. While a hearing could slow the Rescheduling process, there seems to be agreement that it’ll be difficult for opponents to demonstrate legal standing. When the US Supreme Court unanimously rejected a legal challenge to the abortion pill this month, it did so by ruling the group did not have standing to sue.
Hugs, Not Drugs 👈
Its time to sunset a misplaced war.
June 25, 2024
A United Nations expert is urging member nations to end the war on drugs and enact harm-reduction policies such as decriminalization, supervised consumption sites and widespread availability of overdose reversal drugs, while moving toward “alternative regulatory approaches” for controlled substances.
Among the UN report’s recommendations is that countries “decriminalize the use, possession, purchase and cultivation of drugs for personal use and move toward approaches that protect people’s health and human rights.”
Pacific Slights
California birthed some of the biggest global brands in the cannabis industry after the legal market launched in 2018, but it has also given rise to some of the most dramatic flameouts in recent memory.
The list of not-so-golden canna casualties has quickly piled up, with former marquee brands such as Flow Kana, MedMen, High Times, Herbl and Glass Door among those who’ve been impacted by the malaise during the last eighteen months alone.
Mass Holes
Massachusetts Gov. Maura Healy (D) said the state’s Cannabis Control Commission needs to move in a “different direction,” but she declined to say whether the agency tasked with overseeing the marijuana industry should be sent into receivership.
Modeled after the commission overseeing casinos, the agency has five commissioners appointed by the governor, attorney general and treasurer, but a review indicated an “urgent need” to authorize a receiver who can manage the day-to-day operations.
China Riders
An NPR investigation into clusters of farms in New Mexico found that the businesses employ, are managed and are largely funded by Chinese people. They are part of a new pipeline of migrants leaving China and making unauthorized border crossings in Mexico, with many are taking jobs at hundreds of illicit U.S. cannabis farms.
Bowl Games! 👈
The NCAA greenlights cannabis.
June 26, 2024
The National Collegiate Athletic Association (NCAA) has voted to remove marijuana from its banned substances list for Division I players, effective immediately.
About five months after NCAA’s Division I Council proposed the rule change, the body adopted the policy on Tuesday, emphasizing that cannabis is not a performance enhancing drug and that it should be treated the same way as alcohol.
Wax On
Brazil’s Supreme Court on Tuesday voted to decriminalize possession of marijuana for personal use, making the nation one of Latin America’s last to do so, in a move that could reduce its massive prison population.
All the justices said decriminalization should be restricted to possession of marijuana in amounts suitable for personal use, while selling drugs will remain illegal.
Block Party
A House committee rejected multiple marijuana-related amendments to a series of spending bills, including proposals to ban certain federal agencies from testing job applicants and to prevent border patrol agents from seizing marijuana from state-licensed businesses.
The Rules Committee also rejected an amendment from Rep. Nancy Mace (R-SC) that would have barred military branches from removing a servicemember based solely on a past nonviolent cannabis offense or conviction.
You can’t spell “Wrong” without “ron”
Florida Gov. ron DeSantis (R) continued to dig himself into a hypocritical hole after he again railed against a cannabis ballot initiative, arguing that it would protect the right to use cannabis more strongly than the First Amendment protects free speech or the Second Amendment protects gun rights.
The governor said the proposal would allow people to “do marijuana wherever you want—just smoke it, take it, and it would turn Florida into San Francisco or Chicago or some of these places.” DeSantis, of course, recently vetoed a bill that would stop the sale of untested and unregulated gas station weed across the Sunshine State.
Random Thoughts
As MSOs pass the hat in Florida to fund their ballot initiative, they've been flanked by the farmers and alcohol lobby in DC; the industry that’s been playing by the rules (onerous taxes) doesn't have the ability to fight a two-front war.
The credit markets have been getting better and while we know "credit leads equity," the lack of pipes/ custody has muddied that dynamic, at least thus far.
We've been talking about and waiting on significant M&A for years but it feels like we could finally see some movement before the end of the summer as a function of both want and need.
It's Debatable 👈
Will canna enter tonight's conversation?
June 27, 2024
The Biden campaign is stepping up its push to draw lines of distinction between the president’s marijuana policies at those of former President Donald Trump, stressing that cannabis is “not as dangerous as we once believed” on a new campaign page.
The new Biden campaign webpage also criticized Trump, arguing the former president “made the failed approach to marijuana worse.” Of course, the two are scheduled to debate tonight at 9:00 PM ET but we don’t yet know if this issue will be discussed.
Kingpin 🎳 Cannabis
Pennsylvania’s first bipartisan bill for adult-use cannabis has been introduced. House Bill 2500 includes possession limits of 30 grams of cannabis flower, 1,000 milligrams of THC products and five grams of cannabis concentrate.
Every state that borders Pennsylvania has legalized adult-use cannabis except West Virginia (because its West Virginia) and state leaders say they need to catch up.
“The reality is every other state is trying to do this and 90% of the states around us have done it. We’re being left behind and Pennsylvania shouldn’t be a leader at not leading.” State Rep. Emily Kinkead (D-Allegheny).
Green Hens
A Delaware Senate committee advanced a House-passed bill that would let existing medical marijuana businesses in the state begin selling cannabis to adults, a move designed to allow recreational sales to begin months earlier than planned.
Separately, the Delaware Senate approved a House-passed bill that would enact state-level protections for banks that provide services to licensed marijuana businesses, and they’ve sent it to the governor’s desk.
Blue Grass
Gov. Andy Beshear (D) announced today that Kentucky’s Medical Cannabis Program is accelerating its timeline. Applications for medical cannabis businesses will open on July 1, six months earlier than planned.
Pregame (written at 9:15AM)
We fire up a fresh set after yesterday's faint pulse reminded stakeholders of what a full-throated heartbeat could look like if bulls were able to get their shit together.
Remember, throughout May and most of June, as MSOS cascaded through trendlines, moving averages and finally the March lows, the exodus during that 40% downdraft ushered in some of the worst sentiment this space has ever seen.
We offered that the only bullish thing we could hope for was a false breakdown, akin to the false breakout April 30th—and after piercing March lows June 13 and spending a week staring into the abyss with Lou Mannheim, we reclaimed that level on Monday.
Now it's time to see what the bulls have ammo-wise, because as nice as $7.30 and $7.50 were, they don't have the technical importance of the twin 200days at $8ish, and it's hard to overstate the psychological importance of those twin-deuces.
ATB on U.S. Cannabis
Multiples at Attractive Levels, Rescheduling Still Not Priced In: the group trades at an average NTM EV/EBITDA multiple of 6.3x, vs sector valuation multiple of 11.8x and our estimation of multiples in a pro forma base-case rescheduling scenario of 14.6x.
We view Ascend Wellness (PT $4.00) as having the largest upside potential in our coverage group. Ascend trades at NTM EV/EBITDA of 3.4x, a 46.0% discount to the group despite being positioned to experience rapid growth (we project 24e revenue growth of 13.6% y/y, vs MSO peers we expect to grow by an average of 4.6%).
Verano’s Valuation Remains Compelling: Verano Holdings (PT C$13.50) continues to be one of our top picks due to the Company’s top-tier cash flows (substantial FCF generation even while paying 280E) and margins, diversified footprint, and attractive valuation point, trading NTM EV/EBITDA of 5.4x vs DCF-implied multiple of 11.9x.
AGP on Potential for Hemp-Derived THC Beverages & Farm Bill Implications
Hemp-Derived THC Beverage Potential $13.5B Opportunity
We see natural hemp-derived THC beverages as presenting the greatest opportunity to "break the seal" on a THC beverage category that has struggled to garner greater market share in the legal cannabis markets (sub 2%). We believe the combination of being on-trend with consumer preferences (convenience of can, no hangover & shift from alcohol), distribution & marketing could position the THC beverage category to accelerate the share that THC (via other formats) it is taking from alcohol & expand the consumer demographic.
This has already been seen in MN after the state formally set up carve-outs for hemp-derived THC beverages (& edibles), opening the door for broad distribution in liquor stores along with even restaurants and bars, with a liquor store chain owner noting hemp-derived THC beverages approaching 10% of sales.
You Can Get Paid To Get High For Science
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Have a safe holiday and please enjoy responsibly.
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CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice