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Piper Sandler's Michael Lavery: SAFE Banking Act Could Pass, Helping Industry Banking (Part 2 of 3)

01/27/2021 11:13 AM EST

11:13 AM EST, 01/27/2021 (MT Newswires) -- Piper Sandler's Michael Lavery said in a note to clients published overnight Tuesday that pending US legislative changes relating to cannabis could be a "major tailwind" for the sector.
The analyst said regulatory changes that alleviated the headwind of U.S. Tax Code Section 280E, which prevents businesses engaged in trafficking a controlled substance from deducting operating costs. Lavery said the result of 280E has been a "tax rate over 100%" and removing it would "drive a significant lift to earnings and cash flow, freeing up more capital for companies to reinvest in growth."
Lavery also said the Secure and Fair Enforcement (SAFE) Act could also soon become US law, which would provide "better access to banking and credit cards." The SAFE Act does not appear to apply to capital markets right now, the analyst said, meaning the dozens of U.S. cannabis companies listed on Canadian stock exchanges will not be able to move their listings if the Act passes, though Lavery added "that could change."
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