From Deceit To Deliverance: US Cannabis On The Verge Of A Breakthrough

Red and white, blue suede shoes, I'm Uncle Sam, how do you do?
Gimme five, I'm still alive, ain't no luck, I learned to duck.

It’s been a long, hard road for U.S. cannabis, one that if we follow far enough back will take us to a place where the United States did things that the United States shouldn’t be particularly proud of.

Weaponizing a plant as an immigration/ incarceration tool to protect special interests and industrial robber barons was no bueno but maintaining the status quo despite the mounting evidence and continued education may well border on criminal negligence.

When I was a kid, I used to think that propaganda was a russian thing but as I aged, I realized misinformation is a powerful weapon that has been used as a tool.

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Take cannabis: a particularly agile plant whose compounds have been used for, among other things, providing health and wellness remedies for thousands of years.

“Cannabis” was already embraced by the American Medical Association for numerous indications ranging from menstrual cramps to fussy babies when the U.S. government needed a way to stop Mexican immigrants from crossing into the U.S through El Paso.

So they outlawed “marijuana,” which was actually cannabis, unbeknownst to the AMA (who was pissed/ tried to reverse/ got shot down). All the G-Men from the prohibition needed new work, some speculated, as “marijuana” propaganda dominated U.S media.

Instead of the sunlight of time illuminating the stain on the soul of this nation, those in charge doubled down on their deceit despite knowing there was potential efficacy in this magical plant. The Nixon administration used it to target “blacks and hippies.”

Insofar as the past is a prologue to our future—with a nod to the Gods for those still sitting in prison for nonviolent cannabis offenses wishing that a prolonged and painful bear market was the worst of their problems—we now find ourselves back at present day, where the specter of change is seemingly afoot.

Will the HHS recommend that cannabis move to Schedule III?

Where is the long-awaited Garland Memo?

Could any or all of this happen this year?

That was the topic of discussion between several policy experts who were recently interviewed by our friends at Mindset Capital which can be found below, along with our perspective on what’s at stake as we dust ourselves off and ready for September.

The Magic is in the Minors

A new study revealed that obscure cannabis components hold therapeutic promise for treating skin problems like acne and psoriasis. Minor cannabinoids, as they’re known—THCV, CBDV, CBC, CBM and CBN—may help treat dermatological diseases such as psoriasis, eczema and acne. More on cannabis + skin conditions can be found here.

A separate report found that non-psychotropic cannabinoids such as cannabidiol and cannabigerol are analgesics that effectively manage bone fracture pain and promote healing in mice. "CBD and CBG as therapeutic agents that can replace NSAIDs in managing post-fracture pain as both cannabinoids exert potent analgesic effects and, at the same time, promote bone healing.”

State Stuff

Ohio officials have approved ballot language for the upcoming marijuana legalization initiative that’ll go before voters in November; Mississippi MMJ sales eclipsed $4.4M in July; St. Louis, Missouri officials are moving toward consumption lounges; a New York judge granted an exemption for 23 cannabis dispensaries to open w/ regulations expected next month; and Minnesota took in $500K in cannabis tax revs despite their program not expected to be up and running until 2025.

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In other news, Americans perceive cannabis to be less harmful than either alcohol or cigarettes; a GOP congressman is pushing the head of the DEA for an update on the marijuana scheduling review; the North Carolina Medical MJ Commission has its first member and it doesn’t even exist yet; and another study has demonstrated that cannabis exposure isn’t associated w/ increased risk of psychosis in high-risk youths.

We explore the impact of the TerrAscend (TSX: TSND) TSX listing, applaud Glass House Brands GLASF for completing the first tranche of their $15M Series D Preferred Stock offering (with commitments in hand for the rest), amplify Verano VRNOF CEO George Archos, who wrote an open letter to the Alabama governor saying that Alabama patients deserve better than years of litigation, share vibes from a PM who highlights enhanced profitability despite persistent pricing pressures for several operators in Q2; and we look to light the motherf*cking fire under federal cannabis reform, Gus.

All that, and more, just scroll down…

SPY 0.00%↑ QQQ 0.10%↑ IWM 0.00%↑ MSOS 0.00%↑ PT Notional: $18M

Top Stories

Is Cannabis About To Be Rescheduled To SIII? [←click the link after you finish the rest of this note to hear the podcast; spoiler alert: they all say it’s “extremely unlikely nothing happens" by the end of this year]

Those featured on the podcast suggest a sequence of events that jibes with what we’ve heard but once again, everything that’s on the table, from SAFE—which is rumored to have a path through committee next month—to a Garland memo to HHS, will require a functioning government if any of this is to materialize by year-end, or otherwise.

As shared last night,

The predominant theme from speaking with analysts this week was health of balance sheets in the sector/ the ability for these companies to generate enough free cash flow to pay down debt in a rising rate environment.

As there’s no clarity on the outcome/ timing of numerous catalysts—Ohio, Florida, SAFE, HHS/DOJ—the analysts aren’t plugging those potential outcomes in their models.

That doesn’t mean they won’t happen but until they do, none of it will be priced-in; and if they do, the rerating will be sudden. As in, if you don’t already own what you want to own, good luck chasing; and I’ll again share that there will be winners in this world regardless of what happens or when at the federal level.

The specter of meaningful, albeit incremental, change has perhaps never been closer but after 926 days of persistent disappointments, industry observers are conditioned to expect the worst. That would mean another nothing done at the federal level and continued degradation of the investing landscape for the remainder of the year.

Should that happen, a chosen few will emerge on the other side of this bloodletting; forged by fire and positioned to dominate. But for what it’s worth and so it’s said, we remain optimistic we’ll soon see change at the federal level that’ll shift the mood and lose the ‘tude.

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These are dark and uncertain days for the cannabis industry—the legacy folks, social justice applicants and yes, the state-legal operators, some of whom are in multiple domains and all of whom must navigate incredibly complex conditions, obstacles and impediments for the right to pay the U.S. government a 70% effective tax rate—but as a wise man once said, “this too, shall pass.”

TerrAscend on the TSX

“TerrAscend has benefitted from a sharp increase in liquidity since its TSX listing, w/ the company’s average daily trading volume +129% since TSX trading commenced on July 4th, 2023 vs. a decrease of 23% for MSO peers.” -ATB

Sunshine in a Bottle

Glass House Brands Completes First Tranche of $15 million Series D Preferred Stock Offering

Verano CEO Says Alabama Patients Deserve Better Than ‘Years of Litigation’ in Open Letter to Governor

Bonus: U.S. Cannabis Companies Show Enhanced Profitability In Second Quarter Earnings Amid Persistent Pricing Pressures

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.

The Benzinga Cannabis Capital Conference, the place where deals get done, is returning to Chicago this Sept 27-28 for its 17th edition. Get your tickets today before prices increase and secure a spot at the epicenter of cannabis investment and branding.

CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice.

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Cannabis rescheduling seems to be right around the corner

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