Lawmakers in NJ agree on adult-use marijuana legalization bill (CURLF, GTBIF, TRSSF, CCHWF, ACRGF)
Gov. Phil Murphy (D) and state legislature leadership have reached an agreement on bills concerning the state’s regulatory framework on cannabis sales, giving more color to what the impending recreational market may look like. A vote to implement the bill is expected for December 17th. The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act will cap the number of cultivation licenses at 37 during the first two years of the state’s recreational program; microlicenses for businesses with 10 or fewer employees are excluded from this cap. The bill proposes a 7% sales tax on cannabis purchases, with 70% of cannabis tax revenues slated for social equity programs to aid communities disproportionately impacted by the war on drugs.
Mexico poised for adult-use legalization (SAMA)
SAMA/CLVR is on the Hedgeye Cannabis LONG Bias List.
Last month, the Mexican Senate approved an adult-use legalization bill by an 82-18 vote. The bill still needs approval from their lower legislative chamber, and President Andrés Manuel López Obrador needs to sign the bill into law. The country’s Supreme Court has established a December 15th deadline to legalize recreational sales, and the state legislature is expected to act this week.
The bill would legalize possession of up to 28 grams of cannabis and allow individuals to grow up to six plants. It would also establish a federal cannabis regulatory body to issue licenses and establish a legal framework for commercial sales. The bill has a provision to set aside 40% of cultivation licenses in the first five years for communities disproportionately impacted by criminal enforcement.
If Mexico passes adult-use legalization, it will become the third and largest nation, following Uruguay and Canada. Mexico has a population of over 130 million, compared to Uruguay with 3.4 million and Canada with 37.6 million. This is potentially a big positive for our LONG bias in Clever Leaves (SAMA). The company has mentioned it has received several investments from future customers/operators in Latin America, including Brazil and pharmaceutical businesses in Mexico.
Last week, we hosted a conversation with Clever Leaves CEO Kyle Detwiler. Clever Leaves is expected to close its merger with Schultze Special Purpose Acquisition Corp. (NASDAQ: SAMA) in Q4 under the new ticker "CLVR." It's anticipated that CLVR will be listed on the NASDAQ.
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Ayr Strategies announces non-dilutive $75M debt financing and ticker change (AYRWF)
AYRWF is a Hedgeye Cannabis Best Idea LONG.
Last week, Ayr Strategies announced a $75M senior secured debt financing. The company is one of a small number of cannabis companies to be able to issue public debt. The interest rate on the notes will be 12.5%. The high-interest rate reflects the difficult access cannabis companies have to financing and not the company's fundamentals. Ayr Strategies’ notes' interest rate is on the lower end of the range for cannabis companies. The company intends to use the proceeds to fund acquisitions in Pennsylvania, Ohio, and Arizona, as well as the additional capital expenditures required for completion of the cultivation and processing facilities in those states.
On Friday, December 4th, Ayr Strategies had a temporary disruption of trading of its shares on the OTC under the symbol “AYRSF.” The disruption was due to an administrative issue at FINRA that caused the accidental retirement of the former ticker symbol and temporary suspension of trading on the OTC. According to the company, the most effective and immediate remedy to the situation is establishing a new trading symbol on the OTC Pink Open Market to prevent further trading delays. It now trades under the ticker “AYRWF.”
