The MSOS continues to be in correction mode, trading -1% yesterday, -7.4% for the week, and -9.9% for the month. YTD, the MSOS is 19.3%. The industry's financial underbelly is very strong and getting stronger by the day, with more states coming on with recreational sales like NY and NJ and booming medical sales in PA.
The correction is starting to reflect momentum traders coming out of the stocks as expectations of significant Cannabis policy reform (including a Social Justice element) in Washington will not happen under the Biden Administration.
The Biden administration recently firing staffers for past MJ use makes it clear that Cannabis reform is not a priority in this administration.
Biden was never in favor of reform anyway.
I would argue that buying these stocks for sweeping reform was doing so for the wrong reason. The industry needs incremental reform like the SAFE act to allow them to operate safely in the 21st century. Most legal cannabis businesses operate entirely in cash because of an outdated law barring them from the financial services they need. That said, the SAFE Banking Act would provide only part of what investors want to see.
As we have been saying, in its current form, the safe act needs what we refer to as a "capital market provision" that would allow them to list on major exchanges. The wording and potential revisions are far from done, but in the end, the keyword to focus on is "Permissibility." Permissibility is the word most often used by the Canadian LP when they talk about legalization.
How are the lawmakers drawing up the bill's language that allows for companies to interpret what they can and can't do! To that end, will the language give the US MSO permission to list on major exchanges? Past an incremental change like the SAFE act, any further changes will come after the mid-term elections.
As an investor in the Cannabis industry, incremental reform will allow for further growth in profitability and brand building in the industry, which drives long-term shareholder value.
New York's cannabis bill advancing to a vote soon (GRAMF)
New York lawmakers have reached an agreement to legalize adult-use cannabis. One of the final roadblocks had been concerns over traffic safety and impaired driving. A final bill could be voted on as early as next week. The sales tax rate will be 13%. The legislation would establish a three-tier licensing structure separating growers, wholesalers, and retailers similar to alcohol. The bill will allow residents to maintain a limited number of marijuana plants in their homes.
Another provision of the law will encourage small businesses to participate, with half of the licenses going to social equity applicants and those communities hurt by cannabis policing. A social equity fund will divert some tax revenue to job placement and after-school programs.
Social consumption sites would also be permitted. The flower would also be legal, which was not included in some previous forms of the legislation.
The governor's office estimates annual sales in the state could reach $3.9B. Several companies had publicly stated that they would seek to enter the New York market when legalized, including The Parent Company (GRMAF).
Minnesota is in the mix?
According to MJ Moment, a bill to legalize marijuana in Minnesota cleared a fourth House committee on Wednesday, bringing it another step closer to a floor vote in the chamber. House Majority Leader Ryan Winkler (D), Speaker Melissa Hortman (D), and other lawmakers filed the measure last month. It would allow adults 21 and older to purchase up to 1.5 ounces of cannabis and cultivate up to eight plants, four of which could be mature.
“Legalization of adult-use cannabis is coming to Minnesota one time or another,” Winkler said. “The question is not whether we can stop the trend. The question is whether we are well-prepared to do this right from the beginning.”