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MKM: SAFE Banking Act A Net Positive, But Muted Response From Cannabis Investors

MKM: SAFE Banking Act A Net Positive, But Muted Response From Cannabis Investors

The investor response to the House of Representatives' passage of a bill to ease banking restrictions on cannabis companies was mostly muted because it was expected, and the real test will come in the Senate, MKM Partners said Thursday.

The measure, which would make it easier for cannabis businesses to use the banking system and is known as the SAFE Banking Act, passed the House Wednesday, 321-103.

If it ultimately is signed into law, the bill would be good for the U.S. cannabis industry, analyst Bill Kirk said in a Thursday note — 

both for the added banking services it would allow, and the pro-cannabis momentum it would signal in Washington.

Senate Test Complicated by Impeachment

But further progress may be harder, the analyst said. 

“Its passage through the House was largely expected, with the real test (the Senate) yet to come,” Kirk said. 

The move to the Senate comes at a particularly interesting time, with much of Washington’s attention, including that of the Congress, now focused on a presidential impeachment inquiry that House leaders announced this week.

House Democrats are pursuing the impeachment investigation against President Donald Trump in relation to his discussions with the president of Ukraine over that country’s possible investigation of Trump’s potential 2020 presidential rival Joe Biden.

“We believe partisan lines have likely become more rigid following the impeachment inquiry, and U.S. Senate Majority Leader (Mitch McConnell) has spoken out against cannabis in favor of hemp,” Kirk said. 

If the measure passes, the benefits would mostly accrue to smaller cannabis operators, rather than better capitalized and publicly traded companies, he said. 

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Not Triggering for Canopy-Acreage Deal

As it is written, MKM doesn't see the bill as a "triggering event" for the contingency-based Canopy Growth Corp (NYSE: CGC) acquisition of Acreage Holdings Inc (OTC: ACRGF).

Ontario-based Canopy earlier this year struck a $3.4-billion deal granting it the right to acquire New York-based Acreage after a "triggering event" occurs: U.S. legislation that legalizes cannabis. This bill likely isn't that event, Kirk said. 

Related Links: 

House Approves SAFE Banking Act; Cannabis Industry Rep Says 'We Cannot Afford To Wait Any Longer'

Canopy Growth CEO Talks Leadership Concerns, Vaping, Beverages, Acreage Deal 

Latest Ratings for CGC

Feb 2020Stifel NicolausMaintainsBuy
Jan 2020BMO CapitalUpgradesMarket PerformOutperform
Nov 2019Bank of AmericaUpgradesNeutralBuy

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