🪨 Live Free or Die 🪨

Author

Anthony Varrell
June 13, 2024

GM Everyone,

Today could be another great day for the cannabis industry (not including stocks) as the adult use cannabis framework for the state of New Hampshire is slated to be voted on and passed. This would make the Granite State the 25th in the nation to legalize adult use cannabis. Big move, eh?

Live Free or Die.

Today’s letter can be read in 9 minutes and 26 seconds.

What's Driving the Market Today?

NASDAQ Stock futures are up, the broad market is flat, here is traders are focused on today:

  • Fed's rate cut timing in question as markets anticipate changes.

  • U.S. inflation data shows prices unchanged, easing pressure.

  • S&P 500 nears record let by big tech.

  • Trade tensions rise with EU and U.S. on Chinese EV tariffs.

  • Bank of Japan meeting and U.S. bond auctions eyed for market cues.

💸 High Impact

The Empire State Is Healing

The What - The Empire State got off to an abhorrent start when they rolled out their adult use cannabis program on March 31, 2021, with the passing of the MRTA. Everything that could have possibly gone wrong has gone wrong. The companies that paid their dues have suffered, those given access to participate in the market due to being wronged have suffered, and the illicit market has been given the ability to thrive.

There have been lawsuits, hearings, corporate beheadings, and padlocks put on doors, but the concrete jungle still has a ways to go before we can deem it a market worth recognition. However, in the last few weeks, we have seen signals that some green shoots of change are starting to rear their heads.

For instance, within the last week, bills have been passed to allow farmers markets throughout the state, with a permit of course. Farmers are allowed to partner with retailers to have an open-air market displaying and selling their product. Home grow has also finally rolled out, and New Yorkers are able to grow 6 mature and 6 immature plants within the confines of their own home. These are small wins, but I consider them all net positives.

To boot, we have eclipsed the $200 million mark in overall revenue generated by the program, which pales in comparison to peers, but hey, it's a start, right?

Why It Matters - New York was seen as a potential massive market for many of the MSOs to thrive in, commanding hard-earned investment dollars with the promises of planting your flag in one of the top markets in the country. Green Thumb, Cresco, The Cannabist, and Curaleaf, to name a few, have all built out infrastructure within the market and have seen minimal ROI thus far.

Most companies are betting on being able to make do via the wholesale market and are waiting until some things get smoothed out to launch AU retail. However, we are seeing that New Yorkers do, in fact, spend more on average than their peers, with the average basket size in NY being $123.16 compared to the national average of $80.78. It might be time to get in the game, guys. There are pesos to be made.

Who’s In Charge - The New York OCM has been a punching bag and revolving door for all the mishaps of the market. As is deserved, this circus was set up from the start to fail and has been nothing short of a full-on display of buffoonery, with blame going straight to the top, to Governor Kathy Hochul.

A new sheriff is in town as of this week, as Felicia Reid has been named the acting executive director of the OCM following the resignation of Chris Alexander (good riddance). She is an interim, however, as the Governor's office already has a nationwide search going to find a permanent warden for the asylum.

My .02 - New York has a really long way to go to get out of this hole they put themselves in, and there is no visible light at the end of the tunnel as of today. They are still trying to figure out how to roll out their social equity program, while continuing to slander their funding partner for what is deemed a fair deal. When you look at it through the lens of risk and cost of capital, it’s not a bad deal whatsoever; for the lender, it’s what the supporters of the program would deem equitable.

We all want New York to thrive, and I’m sure it will in due time. But for the immediate future, I will probably continue to minimize my hopes for the market and continue to watch as the traditional market matures and the illicit market wavers, God willing.

📈 Dog Walkers 

Holistic Industries Is Not Living Up To The Name

Holistic Industries is a privately held MSO with operations in 6 states and, as of this morning, is a company that I would have a hard time buying flower from. Allegedly, they knowingly had a mold problem in their Massachusetts grow, and instead of destroying the crop and doing the right thing, they sought out favorable testing facilities that would pass the moldy flower onto consumers. Consumers did wind up complaining. Examples like this, if true, are how we lose the trust of the consumer and take steps back versus the many steps forward we have already taken.

Trump Wants Bitcoin Made In The USA

The Republican presidential candidate took to social media this morning to decree, "We want all the remaining Bitcoin to be MADE IN THE USA." Has anyone told him how this stuff works? Highly doubt it. I would strongly suggest 45 gets a crash course in crypto/blockchain if he's going to start campaigning on it so he can avoid looking like an outright fool. Donald backing BTC was not on my bingo card for 2024 or ever, for that matter. But here we are.

Tilray Tapping Those Bright Summer Vibes

Tilray announced yesterday some new form factors to share their products and some summer vibes with friends. They launched multi-pack pre-rolls (a product category they have lost 12% marketshare in over the last two years), Twisted Vapes (another product category they have lost over 10% marketshare over the last two years) and infused pre-rolls. Maybe this is the spark they need to turn around the current trends on their Canadian cannabis products.

🔢 Number O.T.D.

55

That is how many towns will ban adult use cannabis in Ohio when it comes online in the coming weeks. None of the major metropolitan areas have opted out of legalizing the plant, and most are small towns in the northeast and southwest. I would be very interested to cross-reference these moratoriums with how the areas swing politically. Ohio is coming online one way or another, and this is not something new as there are even towns in Colorado that opted out of adult use. Colorado Springs, we are looking at you. So, let's cheer on the ones that are in for adult use and respect those who would like to abstain from it in the Buckeye State.

🗞️ The News

📭 Research

Initiating Coverage: Green Thumb Industries - Download Here

Reconfirming Buy Rating: MariMed - Download Here

Initiating Coverage Of Verano Holdings Corp. - Download Here

Initiating Coverage: Trulieve Cannabis - Download Here

📺 YouTube

MSOS ETF and Marijuana Stocks Update

What we covered:

✅ Don Murphy joined us to go over whats currently going on in Washington as well as the current state of medical cannabis in the media.

✅ Dan Ahrens from Advisors Shares, the manager of the MSOS Cannabis ETF. Dan will share what buying and selling trends he sees in the MSOS ETF and Cannabis stocks and what this will mean for future Marijuana stock prices.

✅ Theres a major mold problem happening in Massachusettes that is in the spotlight of the media.