A Tale Of Two Tapes: Cannabis Earnings Will Separate Have's And Have Not's

Daily Recap- August 1, 2023 

Cannabis is now legal in Minnesota, making it the 23rd state to legalize adult use. 

Senator John Hickenlooper (D-CO) has filed a bill to prepare for federal cannabis legalization with alcohol-like regulations. The legislation—titled the Preparing Regulators Effectively for a Post-Prohibition Adult-Use Regulated Environment (PREPARE) Act—is largely identical to the House version that was filed in April. 

[^ would require AG to establish a 'Commission on Federal Regulation of Cannabis’ w/in 30 days of enactment through an alphabet soup of agencies that would comprise a governing commission. Sounds good to us, as long as the federal framework builds upon existing state-legal structures and regulations; 10th Amendment and all] 

The U.S. Senate has approved legislation to protect people from being denied security clearances due to past cannabis use, legislation that Marijuana Moment Founder Tom Angell called, “the biggest marijuana policy reform ever approved by the Senate.” 

• Click here to get Cannabis Confidential delivered to your inbox daily. 

The master-of-the-obvious statement of the day belonged to White House Drug Czar Rahul Gupta, who wisely observed that the President’s marijuana pardons/ scheduling review could help resolve policy conflicts. “We’re failing to create a structure through which our society can thrive, and it’s causing problems.” Thanks, Scoop. 

TerrAscend front-ran the upcoming earnings season by preannouncing stronger-than-consensus Q2 revenues and gross margins and providing robust full-year guidance. It should be noted that Maryland, which launched July 1st, didn’t contribute to Q2 and management believes the company is positioned to be a market-share leader there. 

In other related news, a new study shows cannabis is effective in treating patients with Alzheimer's; Diddy’s grand canna plan fell through; NYC ranks as the top cannabis-consuming city in the world; an anti-cannabis police chief used to pull tubes before breakfast; and Maryland canna sales are blazing.  

A Tale of Two Tapes 

The upside of anger—a silver lining, the glass half-full—is that this incredibly fucked-up status quo continues to provide us with an up-close-and-personal look at who does what, when, how and with whom when the going gets—and stays—tough. 

Click here to get Cannabis Confidential delivered to your inbox daily. 

The allusion to Charles Dickens should ring true soon enough as we dig into earnings; they’ll highlight the best of times (all things considered in our FUBAR world of canna) for those executing against their operational/ financial plan. Those teams will kick ass and take share until clarity emerges through the hazy shade cast by the War on Drugs. 

Many, however, won’t be as lucky. It takes a very particular set of skills to grow quality cannabis at scale across multiple siloed geographies—doing so while paying a 70% effective tax rate/ having no access to capital all these years is a goddamn magic trick. 

[there are several parallels here; Y2K, of course; the pets.coms/ webvans vs. a handful of FAANG names, as well as the ultimate rhyme: how the first prohibition ended and that socioeconomic framework vs. the modern day real-time devolution we’re seeing] 

Looking ahead to the upcoming earnings, we favor Green Thumb GTBIF and Verano VRNOF among the Tier-1 MSOs, and continue to favor TerrAscend TSNDF TSND, as well. All three share qualities we look for—management, footprint, execution and balance sheet strength—and all are well-positioned to succeed regardless of what happens in Washington D.C. 

• Click here to get Cannabis Confidential delivered to your inbox daily. 

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