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So… it’s been a minute since our last newsletter. The good news is, we’re back. You may notice a slightly new format - that’s an evolving aspect as we wrap up a fairly wild 2020. Stay tuned. 

Two Steps Forward...
It’s been well reported, but let’s pat ourselves on the back a little: while the bitterly contested election this year yielded, in many ways, fairly mixed results, there was one clear winner: cannabis. Legalization efforts ran the table in ballots across five states (hey now, we called it!), while a Biden victory has pundits hopeful for a favorable legal/regulatory environment (or even... legalization 😮). 


The overall momentum seems, in many ways, to be compounding. Other states, facing budget shortfalls while public opinion on cannabis rises to all-time highs, are likely to make similar flips in the near-term. New York (once again) is claiming to be “ripe” for cannabis legalization. Pennsylvania, spurred by potential ‘border bleed’ into NJ, is pushing as well. Heck, even Texas is legitimately considering a variety of legalization and decriminalization bills.

...One Step Back?
Taking a step back, however, it’s worth parsing out the specifics of today’s state of play. Cannabis stocks have soared following the announcement of Biden as the presidential winner. But the hype ignores that Biden’s stance on cannabis… is a little lukewarm. Despite a platform that advocates for decriminalization, his overall ambiguity on the issues and history with anti-drug legislation doesn’t point to a focus on substantially changing the status quo (believe me, I’ve done the primary research).  

Had the Blue Wave landed, it’s likely that Biden would have accepted bills that extended beyond his platform. But, with the control of the Senate still TBD via Georgia’s runoff and likely staying Republican, the ability to push through far-reaching Congress-led reform is significantly diminished. So, while an upcoming House vote on the MORE Act has some salivating over true national reform, we’re still most likely to see dysfunction at the national level (with an outside shot at moderate changes in the SAFE Banking Act or States Act. 

Overall, the successes at the state level have been substantial and something would definitely be better than nothing at the national level. But, when you think your team has a shot at the Super Bowl, it’s hard to get as excited about winning the division a few years in a row.


Hype House

Regardless, investors certainly were pumped up by the news. As the only stocks to trade on major exchanges and the primary holdings of cannabis ETFs, Canadian LPs were the main beneficiaries, seeing prodigious stock bumps. More than a few took advantage of the increase, as Aurora and Organigram raised capital to take advantage of the momentum. 

It’s expected the fresh capital will be ammo to support rapid moves into the U.S., should conditions permit. Aphria has actually already launched the first salvo, acquiring SweetWater Brewing as a potential platform to cross-sell its products through SweetWater’s beer distribution channels.

With all the Canadian interest in moving south, it begs the question: are investors focusing on the wrong companies? While U.S. MSOs haven’t seen nearly the same price appreciation, they’ve are primed to benefit now from legalizing states or (the more remote) federal reform. Moreover, they’ve largely outperformed their Canadian counterparts, with many showing defensible success.

It seems like a few public U.S. companies might be emerging as leaders in the U.S. market, but a number of younger entrants are also making waves. Moreso, with the game-changing merger of Verano and AltMed (deals aren’t dead!), the balance of power is very… dynamic. If there’s any major lesson to be gleaned from the earlier innings of cannabis, it’s that early size and scale is an advantage… but not an overwhelming one.

Product of the Week: Rhythm CBD Seltzers
Big On Bevvies: If you’re a long-time follower, you’re likely very aware we’re pretty big on cannabis beverages around here. The landscape is constantly evolving, with new entrants on both the THC and CBD side. The latest we’ve tried: Rhythm CBD Seltzers, an intriguing new player that brings a functional focus with SKUs branded Recover, Awake, and Dream. Plus, they’re primed to please even the biggest of health nuts: vegan, gluten-free, non-GMO, keto-friendly, low calorie, zero sugar.

ICYMI
Recapping some of our best and most recent long reads

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