Finding The Middle Ground
Broad cannabis reform needs to happen, but it was never going to happen in 2021 or 2022. Leading up to 4.20, Senate Majority Leader Chuck Schumer's was relentlessly Tweeting that a bill was coming. I and others speculated that 4.20 would be a great day to do it, and while yesterday he spoke on the house floor about the subject, he did not introduce a new bill but said one was coming even if President Joe Biden does not get on board. There is just one big problem it appears that the majority leader doesn't have the votes for passage in his own Democratic party. Two Democrats told POLITICO that they oppose removing federal penalties on marijuana, let alone the 10 or more Republicans necessary to reach 60 — the threshold needed to bypass a likely filibuster. This sets up Cannabis to be a political football in the 2022 midterms. Cannabis, which has broad support among both Democratic and Republican voters, some could argue that a failure this year could work to Democrats’ advantage. Schumer and other progressives now have the opportunity to use the issue against the GOP in next year's midterms. That doesn't do much for the carnage that was cannabis stock yesterday, but helps explains part if not all of the move. I see this as good news for getting the SAFE act passed in 2021. The middle ground for Schumer is to now focus on the SAFE act, to help support his 2022 campaign. The two Democrats that don't support broad legalization Sen. Jeanne Shaheen (D-N.H.) and Sen. Jon Tester (D-Mont.), both said that their focus is on passing the banking measure, which has much stronger support in both parties. Now the timing turns to get SAFE passed before priorities shift to the midterm election cycle.
Maine Tracker
Recreational sales began in October in Maine after voters passed legislation to legalize recreational use in 2016. Sales have been increasing an average of 35% Month over Month since they commenced. Acreage farms and Curaleaf are the two public MSO's that operate in the state. Maine has a population of 1.34 million people. Using Maine's population and usage rates, we estimate the state's adult-use market will be $340 Million at maturity. Maine has a population of 33,453 per dispensary, making it slightly underserved compared to the US average allowing some room for growth of dispensary count.
Ohio License Increase
The Ohio Board of Pharmacy voted unanimously to increase the number of dispensary licenses to 130 from the current 57 license cap. The increase is to increase access for patients who drive far to buy products and drive down prices by creating increased competition. Ohio is currently the 4th most underserved state in the US. Ohio will remain underserved even with the new license increase compared to the rest of the US states with legalization. Public companies with the largest percentage of their footprint in Ohio are BMMJ (20%), CRLBF (17%), ACRHF (12%), GTBIF (7%), HRVSF (7%), and VRNOF (3%). These incumbents will face stronger price competition, with margins and revenues per dispensary likely decreasing as new licenses are added to the state.
Yesterday, Jushi Holdings Inc., announced it has signed a definitive binding agreement to acquire OhiGrow, LLC, one of 34 licensed cultivators in Ohio, and Ohio Green Grow LLC, for total consideration of $5.0 million in cash, inclusive of an approximately 10,000 sq. ft. facility and 1.35 acres of land. OhiGrow will complement the soon-to-be operational 8,000 sq. ft. state-of-the-art Ohio medical cannabis processing facility, to which Jushi provides operational and consulting services. OhiGrow is expected to supply biomass to the Processing Facility to create manufactured medical marijuana products for sale into the wholesale market. The Acquisition, which is subject to regulatory approvals, is expected to close in Q3 2021.
