Making Marijuana Millionaires
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Lowell has shifted to going national
U.S. Constitution's dormant commerce clause is a doctrine of constitutional law interpreting the interstate commerce clause of the U.S. Constitution. It aims to prevent states from enacting protectionist measures and therefore prohibits them from adopting policies that obstruct the free flow of goods, people, or capital within the country.
https://www.forbes.com/sites/dariosabaghi/2022/12/23/how-us-constitutions-dormant-commerce-clause-is-challenging-marijuana-legislations
In the Prior post from Needham , they are parroting the theme of the week , No capital available at resonable rates and the free Cash flow , Apparently there is capital avaliable , see below ; Note this is 2 different states , loan rates and Banks
Dec 22nd
Trulieve announced the closing of a commercial loan secured by a cultivation and manufacturing facility located in West Virginia for aggregate gross proceeds of $18.9 million. Trulieve will pay interest at a fixed rate of 7.3% for the first five years of the ten-year loan. After five years, the rate resets at five-year Treasury plus 3.5%
Dec21st
Today Trulieve announced the closing of a commercial loan secured by a cultivation and manufacturing site in Florida for aggregate gross proceeds of $71.5 million. Trulieve will pay interest at a fixed rate of 7.53% for the duration of the five-year loan. Lenders were comprised of three banks, with Valley National Bank serving as lead agent.
Needham Capital
Multi-State Operator '23 Key Debates; The Winter of our Discontent
The US cannabis industry could see better topline growth in '23 as more states convert to adult-use, but macro pressure and price decline led by states in the Western US create uncertainty in the rate of overall growth. While we think the failure to advance SAFE Banking into law in '22 is unlikely to have any discernable impact on '23 operating results for the larger MSOs, it highlights the difficulty in advancing even modest cannabis reforms given the partisan divide in Congress. With equity funding declining 75% and debt funding down 57% in '22, the capital available to support infrastructure growth is largely drying up. We think that HHS/DOJ review of where cannabis is scheduled under the Controlled Substances Act will likely eliminate 280E and reduce effective tax rates from 60-100%+ of pre-tax income back to the federal statutory rate of 21% by allowing normal business deductions.
Key themes into '23:
MSOs have one key deliverable in 2023 - cash flow generation. Global equity risk premiums and rates increased substantially in '22. Equity funding to support growth and M&A has largely dried up, and while debt funding is still available, we don't believe debt funding will be an abundant source of capital in '23. Operators without cash generation, or a visible path to cash generation, might not find funding or might only be able to acquire highly dilutive equity funding or expensive debt funding. For the larger public operators, we expect to see capex decline by 50% or more, as cultivation infrastructure has largely been built in the states where MSOs have the greatest exposure. This anticipated decline in working capital investment and capex will provide for higher levels of cash flow generation in '23 for most of the larger MSOs, as we see it.
My Take on the Lowell relationship is one that evolves , I am hopefull SHWZ gets to manufacture and distribute Lowell 35's . That product is a game changer in my opinion , it seems to be doing great in Cali . Without going into to much detail The 35 prerolls are cheaper then 95 % of prerolls but the quality is still very high . I did mention to JD in Boca that he should buy Lowell,Lol . Seems like a great fit with JD on the execution side and George Allen is a an amazing Visonary
Good thread on Free Cash Flow
5. IMO, the space will begin to gravitate further to FCF yield as CapEx brakes apply in '23. Hard to use a metric that only a couple juniors qualify for ( $CXXIF currently tops GAAP cos w 26% FCF yield on TTM reported).
— Sammy J (@sammyj_19) December 20, 2022
Here's a useful piece on FCF, ICYMI:https://t.co/Gew4LYTDal
Its time to panic ,,,,,I hate to say it but because the fact that there is no safebanking , basically that means nobody will ever smoke blunts again,like never . LOL.
Panic selling into tax loss selling , plus EUROCLEAR in England forced every investor last week to sell the US cannabis securities,,, This should bottom us out and eventually In time we will go from OK to GOOD to GREAT,,
CEO George Allen
Our strategy is shifted to leaving California leveraging your California brand Authority and authentic
6:54
authenticity to enter into new States which have less competitive Dynamics now
6:59
we've only seen a very select view of operators capable of embracing these final two strategies and we are
7:06
steadfast in our belief that Lowell is one of them and that's why we have tilted our entire operations towards
7:13
those strategies
Via @FoxBusiness: SAFE Banking Act not about pot, it's about dysfunctional banking: SMG CEO James Hagedorn https://t.co/6EgBA2VLNB
— John Boehner (@SpeakerBoehner) December 17, 2022
Update-Safe is still alive (🫣) in the Omni process. Consensus from calls/meetings is that the Rs are open to negotiating to allow Safe to go into the Omni, remains to be seen if Schumer will make Safe a priority and make the demand. Turn up the volume https://t.co/b94P6RBa3K
— Brady Cobb (@BCobblaw) December 15, 2022
Before safe banking became the one and only catalyst , simple things like branding that was separating Schwazee as the best invesment choice in Colorado along with elements like super regional mso etc ....
https://mjbizdaily.com/how-branding-is-key-to-success-in-struggling-colorado-cannabis-market
$CGC CANOPY GROWTH TO RING NASDAQ OPENING BELL Dec. 9, 2022 Chief Executive Officer David Klein and other Canopy Growth team members will ring the Nasdaq opening bell on Monday, December 12, 2022. #legalizeit pic.twitter.com/OKl0JE7weH
— JoeGriesler (@JGriesler) December 9, 2022
Lots of emotional people in the US MJ space these days.$MSOS #SAFEBankingAct
— StockMonster (@st0ckm0nster) December 6, 2022
Chill pic.twitter.com/VOCVTLhrZo
Perspective
Just had a pretty aggressive option purchased Dec23 14 calls 4,000 which is equal to 400,000 shares $msos 216,000k cost. Very bullish trade #safebanking
— FastGuy (@FastGuy77) December 7, 2022
Checking in w an early Wednesday morning update from Cowen’s Washington Research Group. Bottom line: still 75% chance SAFE gets done and Omnibus is the most likely vehicle. #SAFEBanking pic.twitter.com/g7JXIW8waa
— Jesse Redmond (@jesseredmond) December 7, 2022
Update—McConnell’s comments 🤦🏽, political theater at its finest. Safe + Hope remains the vehicle, consensus has always been omnibus approps as the vehicle, pivot to NDAA was a new twist. This is a volatile process (same as the cap mkts), still the best shot on goal so far. Onward
— Brady Cobb (@BCobblaw) December 6, 2022
Start at 26;50 great intel on safe banking , were gunna be a ten x muli bagger very soon
https://open.spotify.com/episode/2zrThvAZznW3ad58B6hsfT
Good listening material , if you only want to hear about safebanking then start @26;50
https://open.spotify.com/episode/2zrThvAZznW3ad58B6hsfT
We went to Jaret 💍
— Todd Harrison (@todd_harrison) December 5, 2022
🙏 Cowen / JS 👊
🇺🇸 #cannabis 🌿 pic.twitter.com/WQ9qmkO3h7
SAFE BANKING from BTIG
WHAT YOU SHOULD KNOW: US cannabis stocks are up widely on reports that the Senate will include SAFE Banking language within sure thing year-end spending bills. While noting that a lot can still change, inclusion could come as soon as this week within the annual Defense Spending bill. Banking reform would be the early holiday gift that industry stakeholders have long awaited with SAFE passage a game changer for operators and investors driving enhanced (rationalized) valuations and reduced risk on operation. We expect the recent gains in US cannabis company stocks to continue on progress in the short term while further longer term upside will come as increased deal flow permits new institutional investment and eventual uplisting speculation along with consolidation. We believe larger operators will be the more immediate beneficiaries of gains on greater name recognition, existing liquidity and sooner uplisting potential while an enhanced valuation gap by market cap will promote consolidation driving outperformance in smaller companies that are viewed as takeout candidates.
Reports of a bipartisan group of Senators planning to include cannabis banking reform in either the government's annual Defense Spending Bill or the omnibus federal funding package (likely 12/23 deadline) have driven US cannabis stock gains today. The Defense Spending Bill is the initial vehicle for inclusion and the bill is being pre-conferenced meaning that reform could clear the House and Senate without amendment this week.
If SAFE passes, US cannabis companies will gain access to traditional banking dramatically reducing the cost of capital and making capital easier to obtain particularly debt financings. Cannabis companies have historically been burdened by onerous debt terms including inflated interest rates and predatory factors that inflate costs and even hinder business success so the opening to traditional sources of capital would reduce the risk to operators (at a time when interest rates are peaking and large debt bills are coming due). Coming out of the Q3/22 earnings cycle, operators struck a cautious tone on growth investment due in part to limited capital access, we expect that to change if banking access comes to fruition.
US cannabis is largely devoid of institutional investment (~4% institutional investment vs. >60% comparable consumer companies and 20% for Canadian cannabis companies) because historically there has been no liquidity or custody options for institutions. Indirectly, if traditional banks begin servicing the market through financings they will have to become more accepting of trades permitting institutional investment for the first time in order to fund transaction driving upside in stocks.
? The lack of institutional investment has dragged on stock valuations for US cannabis companies. In our view grocery remains the most logical comp to US cannabis and despite having a '21-23E revenue CAGR that is 4x higher and '23E adjusted EBITDA margins that are 5x higher, US cannabis stocks trade at a roughly 50% lower '23 EV/ EBITDA multiple than small and mid-cap grocery companies. We believe the grocery valuation should represent the starting point of rationalized valuation comps.
Consolidation will continue regardless of SAFE outcome in our opinion, but a likely widened valuation gap by market cap on SAFE driven upside for the space could catalyze smaller operators to take exit offers while access to capital will prompt larger companies into greater investment (both for deals and the buildout of operations).
Of all the cannabis stocks i follow SHWZ has the highest buying % @ 89% , not much volume though , But holy moly Tilray traded almost 40 mil shares already
Im guessing 1000 or less people follow the cannabis investing space like us , It may seem like everyone in the world should know that safe banking is happening, they don't.
The story will break to the public this week and it will likely be the first they've heard of it. Don’t even think the passage of SAFE banking gets to the average American.
They won’t even understand / care what it means and wont connect the dots for weeks if not months out
But sentiment is changing rapidly
Jesse Redmond @jesseredmond 13h
As I sentiment indicator, I’ve had more new subscribers to my website in the last week than in the last three months combined.
Its not late to add at all even if you missed the recent run up.The whole world is coming in after you.
Shwz is on the casflow shart in the article
https://www.greenmarketreport.com/cannabis-companies-look-for-capital-pathways-as-cash-crunch-deepens/
This guy has been sour on cannabis for some time even though thats where he made his name and even this guy is now bullish on Safe
#safebanking looks like it’s going to pass, most are oversized in their positions but with the liquidity and run up you have a few good choices. A risk on/off thread… $msos $tcnnf $gtbif $vrnof $crlbf $lglz $curlf $tlry
— Jason Spatafora (@WolfOfWeedST) December 3, 2022
BTIG
CANNABIS: Making Sense of the Week In Cannabis Policy
This was another busy week in the cannabis banking policy discussion. While nothing in D.C. is certain until the ink is dry, we continue to believe that the effort to advance cannabis banking legislation is well positioned to advance during the lame duck session. Please see below for our responses to client questions stemming from the news flow this week. Negotiations. On December 1, Politico reported that Senate Majority Leader Schumer (D-NY) and Sen. Daines (R-MT) were having "productive" discussions regarding the cannabis banking issue. Senate Banking Committee Chair Brown (D-OH) was quoted in that same article saying that he "hopes" cannabis banking language is in the annual defense bill being considered
next week. These comments are positive, and consistent with our channel checks, but we caution against placing too much
confidence in lawmaker comments at this time. We are bullish on cannabis banking legislation making it to the president's desk
during the lame duck, but we found the positive reaction to the article peculiar as it was clear that negotiations were ongoing.
Standalone Bill vs. Legislative Vehicle. The standalone cannabis banking bill, known as the SAFE Banking Act, has 9 Republican co-sponsors. Recent press reports, however, served as a reminder that the best avenue for passage remains through inclusion in a broader legislative vehicle. We note that (1) Senator Chuck Grassley (R-IA) told Politico that he would not vote in favor of a standalone cannabis banking bill and (2) we were reminded that Sen. Tommy Tubberville (R-AL) has offered support for cannabis banking legislation even though he is not a co-sponsor.
The DOJ Memo. On December 2, a press outlet reported on a Department of Justice (DOJ) memo regarding concerns with the potential implications of the cannabis banking bill becoming law. The concerns highlighted in the memo have been part of the conversation for years and are completely understandable given that cannabis will remain illegal at the federal level even if cannabis banking legislation becomes law. Based on our channel checks following the article, we feel confident that the core concerns have already been addressed.
The Vehicle. We continue to believe there are two shots on goal for the cannabis banking legislative effort: the annual defense bill and the federal government spending bill. First, the annual defense bill is expected to be in focus next week and there is a forceful effort to include cannabis banking language in the final package. The House Rules Committee is expected to meet on Monday to consider the defense bill, which will provide insight on the status of the cannabis language. Second, the federal funding package remains a viable vehicle for passage of the cannabis banking language. The December 16 deadline to fund the federal government is likely to be punted to December 23, but there are still questions whether lawmakers will clear a continuing resolution or an omnibus spending package. An omnibus would be far preferable as it would provide more spending clarity and provide a vehicle for attaching policy riders, which we believe could include the cannabis banking language.
Why We Remain Bullish On SAFE Banking In the Lame Duck
We remain bullish on cannabis banking legislation for five primary reasons: There is a renewed urgency on the issue given the recent string of violence in cannabis shops;
.There is no appetite whatsoever for comprehensive reform at this time, which leaves targeted measures as the logical
legislative fallback; There are serious conversations regarding the merits of advancing restorative justice measures (e.g., HOPE Act, VA research)
as a means of assuaging progressive concerns regarding the cannabis banking bill. We will continue to track discussions during the lame duck; ¦ There are clear legislative vehicles, including the best shot on goal, which is the annual defense bill; and
The reaction to the White House's policy announcement in early October demonstrated the political power of the issue.
Nothing is definitive in D.C. until the ink is dry, and even then, we tend to check the ink twice. While we are bullish on cannabis banking becoming law during this Congress, the effort could conceivably fall short once again. In talking to bearish contacts, they generally argue that the clock is working against the effort, and they believe it is difficult to see this provision being prioritized when so many others will be dismissed in the coming weeks. This is a fair argument, especially in the current political climate, but we remain optimistic because we see the combination of necessity, urgency, and clear legislative vehicles.
@Steven Risk,,,did you listen to the twitter spaces link i posted ? im guessing not . Those were comments i was reposting from Noah Hammond and Boris Jordan on the interview fro MJ Stock Trader, While i am optimistic i am just reposting because that interview is 2 hours long , loaded with really good intel.
One more huge push on the price action that will soon come will be 3 other industries and 2 that really have no growth but pay high dividends are Alcohol and Tobbacco , plus Big Pharma . All 3 are going to get into the space and one form or another some are here in already with Constellation owning CGC that own 20% plus of TRSSF and Acerage , Plus Altria owning Cronos .
Price appreciation is coming from Hedge funds , Family offices , , Retail , , , Alcohol , , , , Tobacco , , , , , Pharma and Lastly, , , , , , , , The Big Institutions like Fidelity and Jp Morgan of which both where pushed out in 2020 due to compliance issues
Another paragraph from the twitter spaces
The Float is small for some of these stocks and if you get the buying from institutional capital, The Family Offices , stack that with Retail money which can do some very irrational buying to the upside this could be way bigger then what happened in 2016 or 2020
— MJ Stock Trader (@stock_mj) December 2, 2022
Viridian: "We concur that chances are good for passage of #SAFEbanking and assign a 70% probability to the event. One thing seems certain though, the cannabis equity market will either be up big or down big by the end of the year – a perfect long straddle trade" $MSOS pic.twitter.com/qPhAOLlpDE
— WeedStreet420 (@WeedStreet420) December 2, 2022
I keep getting asked about language; I don’t have it yet, we may get it today but it’s more likely we’ll see language Monday at the rules committee hearing. https://t.co/xOg3wnJfwb
— Natalie Fertig (@natsfert) December 2, 2022
There was a last minute scare tactic being put out by Kevin Sabet (Smart Approach to Marijuana) These are the anti cannaibus scumbags ,,,But BOOM it has been squashed , we are close very close To Safe Passing
Boom! $msos $gtbif $curlf $tcnnf #safebanking pic.twitter.com/VAjVrAr1QI
— DNBC (@DnbcLive) December 2, 2022
Natalie Fertig
@natsfert
#SAFEBanking
@SenRandPaul
also told me he thinks its going to pass, possibly in the NDAA but it could be in another bill like the funding omnibus.
"Even as a stand-alone," Paul said, "I think there's more than 60 votes for it."
Sen @SteveDaines met again today with @SenSchumer
to discuss #SAFEBanking. He said they're talking about additions to the bill regarding cannabis industry workers — "as it relates to income qualifications for a mortgage and so forth," he told me. He backs the changes.
Senate Banking Chairman @SenSherrodBrown
told me he "hopes" that SAFE is in the NDAA, and is working with other lawmakers from Colorado, Montana and Nevada (also
@SenJeffMerkley) on the details.
@natsfert
I've been covering this bill for three Congresses now, and I've never heard this kind of blanket optimism from supportive lawmakers on both sides of the aisle.
Things can always go wrong in the Senate, or it can just run out of time — but it's a very noticeable shift.
Land of Enchantment meet America's Favorite Smoke! We're proud to share that our Award-Winning Smokes are now available in New Mexico with three exclusive blends.
— Lowell Farms (@LowellFarms) November 29, 2022
Head over to your nearest @R_GreenleafNM location and try the Sandia Sativa, Mesa Hybrid, and Enchanted Indica 🌵 pic.twitter.com/DG5Bzs6DM8
The not so good news is the fact that SHWZ has been forced to grow in a terrible business climate IE; 280E tax burden, no interstate commerce, Very expensive or limited access to capital, an almost total ban from industry pundits , the lack of any respect in the stock market for Colorado Co's in the end this will yield a Kick Ass, Efficient well-oiled SHWZ ........The Great news is all thats going away at some point in the near future, profits will soar ,SHWZ will get the respect it deserves , a wall of money is coming into to the Cannabis industry , $ per share will go up and down as always but the trajectory is going in a long term uptrend ,,,$5 to 10 no problem $15 to 20 i can see it happening , $25 to 30 with 3 to 5 yrs is a realistic possibilty. Just Blue Skying for the shiznitz of it
Take a minute to watch this Rep. Perlmutter its only couple hours ago
Safe Banking has a odds on chance of passage ,,,
In a joint letter this week, @ICBA and its 44 affiliated state community banking associations called for Senate passage of #SAFE Banking Act, noting the Senate version has 42 cosponsors while the House passed its version last year for the seventh time on a strong bipartisan vote. pic.twitter.com/kX9xEasv7K
— John R Ramage (@John_R_Ramage) November 30, 2022