In Arizona, recreational marijuana will officially be on the November ballot (HRVSF, CURLF)
Yesterday, Arizona Secretary of State Katie Hobbs certified the adult-use legalization initiative petition and announced that recreational marijuana would almost certainly be on the state ballot on November 3rd. The Smart and Safe Arizona initiative submitted over 400,000 signatures with just 238,000 needed for the ballot. The Secretary of State’s Office invalidated approximately 38.6% of the signatures, but the campaign still exceeded the minimum, valid signatures needed. This announcement comes soon after a judge dismissed a lawsuit challenging the petition’s credibility.
Legalization was narrowly beat on the 2016 ballot in Arizona – just over 51% of voters rejected the move. In a June 2020 survey conducted by polling firm Highground Inc., over two-thirds of Arizona voters were supportive of The Smart and Safe Arizona Act (“act”) to legalize adult-use. (Conducted between 5/18 – 5/22, n=400).
The act proposes a limited licensing structure that benefits existing medical marijuana license holders – they would be given the right of first application for the limited recreational licenses. The act stipulates that on or before April 5, 2021, medical marijuana dispensaries would be allowed to sell recreational marijuana until the state issues licenses for recreational dispensaries, and it says that existing medical marijuana dispensaries could obtain a recreational marijuana dispensary license and potentially operate in the same location.
Harvest Health (HRVSF) has 14 operational retail locations and 4 operational cultivation licenses in Arizona.
Curaleaf (CURLF) has 9 operational retail locations and 2 operational cultivation licenses in Arizona.
Below is an estimated fiscal analysis of adult-use legalization in Arizona, prepared by the Arizona Joint Legislative Budget Committee, that projects possible adult-use sales of $1.04 billion by 2023.
Biden picks Kamala Harris for VP – where does she stand on legalization?
Democratic presidential nominee Joe Biden has selected Senator Kamala Harris as his running mate. When Harris was running for president, she made federal legalization a key part of her platform.
In May 2018, Harris officially came out in support of federal legalization by backing Senator Cory Booker’s Marijuana Justice Act.
In July 2019, Harris sponsored a marijuana descheduling bill, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which had social equity provisions.
In September 2019, Harris released a criminal justice reform plan, saying, “it is past time to end the failed war on drugs, and it begins with legalizing marijuana.”
However, Harris has received criticism on her history as a prosecutor, most notably from former presidential candidate Rep. Tulsi Gabbard (D-HI) in an August Democratic debate: “She put over 1,500 people in jail for marijuana violations and then laughed about it when she was asked if she ever smoked marijuana.”
Harris’s vocal support of legalization goes against Biden’s known reluctance on federal legalization. If the Biden/Harris ticket wins this November, Biden will be entering office at 78 – it seems almost certain that he would be a one-term president. It is within reason to think that Harris will be a strong contender for the Democratic presidential nomination come 2024. With Harris on the ticket and the possibility of a blue wave come November, the prospects for federal legalization have brightened.
ACRGF | Q2 2020 Earnings
Q2 2020 revenue was $27.1M, a 53% YoY increase and a 12% QoQ increase. Pro forma same store sales growth was 46%, making it the sixth quarter of double-digit growth. Same store sales growth was driven by strong check and transaction growth. Gross margin contracted to 41.4%, a 150 bps decrease YoY. Gross margin was negatively impacted by a $0.6 million inventory write down associated with the closure of Form Factory. Excluding this charge, which will not repeat in future periods, gross margin would have been 43.7%, an 80 bps increase YoY. Net loss attributable to Acreage was $37.2M, a slight improvement for Q2 2019’s net loss of $37.5M.
Through their partnership with Canopy, Acreage seems likely to introduce Canopy’s IP related to cannabis-infused beverages in the U.S. within the near-term.
Below are associated comments on beverages from Canopy Growth’s (CGC) Q1 FY21 Earnings Call:
CEO David Klein: “Turning to Acreage. We announced in June an amended plan of arrangement with Acreage that solidifies our path forward. We believe the updated arrangement which must be approved by Acreage shareholders, provides cash for Acreage to develop and grow its federally legal hemp-derived CBD business, while reducing Canopy's purchase obligation and conserving 65 million shares of Canopy Growth stock.
One will continue to target delivering profits and growth by narrowing its focus on key profitable operations. Canopy has already licensed Acreage with rights to certain Canopy IP including IP related to our beverages and vapes as well as our brands as part of the original agreement. Acreage has, in fact, launched our Tweed-branded flower in Illinois, Maine, Massachusetts in Oregon. Acreage has rights to launch Canopy's best-in-class products and brands into the U.S. market including our cannabis-infused beverages, and we expect to hear more about this from Acreage”
