Plus, Canopy closes Acreage deal, SAFER-lite

Wednesday, June 5, 2024

Good morning.

Happy Wednesday, everybody. 

On this week’s agenda: Tomorrow at 11:30 AM, Jeremy will be moderating a fireside chat with Chelsea Davis, the Assistant Secretary for Cannabis at the New York State Executive Chamber, at the Cannabis World Congress and Business Expo in NYC.

We’ll be talking about all things New York cannabis, her new role, and where we go from here. If you’re around the Javits Center (or midtown generally) tomorrow, reach out and say hi. 

-JB & JR

This newsletter is 1,271 words or about an 8-minute read.

💡What’s the big deal?

Green Thumb Industries wants to merge with Boston Beer

Source: Your Cousin from Boston

What happened: Chicago-based cannabis giant Green Thumb Industries wants to merge with Sam Adams’ maker Boston Beer Company, reports The Wall Street Journal.

Green Thumb CEO Ben Kovler sent a letter to Boston Beer founder and chairman Jim Koch on Sunday.

Why merge: In the letter, Kovler says a potential merger would allow Green Thumb to list on a major US exchange. It would also allow Boston Beer to develop more THC-infused products, and give the combined companies more power to pursue acquisitions.

Boston Beer owns a cannabis-infused iced tea brand, Teapot, that sells in Canada, and has a subsidiary researching new cannabis products. The company is clearly familiar with the industry and wants to take advantage of the opportunity. 

But: Japanese whiskey maker Suntory is also circling the Sam Adams’ maker, the Journal reports. Maybe Green Thumb felt like it was now or never. 

From the Wall Street Journal story: “Kovler founded Green Thumb, based in Chicago, in 2014. A self-described cross between Jerry Garcia and Warren Buffett, he signed off his letter with a Grateful Dead quote: “Once in a while you get shone the light, in the strangest of places if you look at it right.”

Background: Expect cannabis mergers and acquisitions activity to ramp up ahead of the potential move to Schedule III, especially as more capital looks to take advantage of the largest shift in federal drug policy in over fifty years. 

Green Thumb Industries is one of the three largest cannabis companies by revenue and was actually profitable this past quarter despite the extra 280E tax burden, unlike many of its peers. 

Our take: Kovler’s letter might be opportunistic, but he’s absolutely right that a deal could benefit both firms — if regulators allow the combined company to keep its New York Stock Exchange listing.

Kovler’s goal here is to figure out the quickest path to ‘up-listing’ on a US exchange, and the Boston Beer deal might be the best way to do that, absent an unlikely change of policy from exchange regulators.

US cannabis companies are forced to trade on Canada’s secondary exchange or over-the-counter in the US, so Green Thumb relies mostly on retail investors. 

Listing on a major exchange would open up the company’s shares to big, long term investors, giving the company the ability to more easily raise money for a deal spree ahead of its competitors. 


💬 Quote of the day

“It’s simple — and we know the solution. A legal retail marijuana market would reduce violent crime in our city and across the Commonwealth. It’s past time to get it done,” Virginia State Sen. Aaron Rouse (D) said on X, responding to a video from a Virginia Beach police officer who said the illicit cannabis trade is responsible for 90% of the city’s violent crime.

Rouse, a former NFL player, previously sponsored bipartisan legislation that would have set up a regulated cannabis market in Virginia. That legislation was vetoed by Republican Gov. Glenn Youngkin.

Rouse is now reinvigorating his push to legalize and regulate cannabis in the state — but it may be a nonstarter until Youngkin is out of office.

Canopy will finally take over Acreage. The deal was first announced in 2019.

What happened: US cannabis firm Acreage Holdings said on Tuesday that Canopy Growth (finally) plans to exercise its options to acquire the company. 

Canopy plans to exercise its call options to acquire Acreage. Once the deal closes, Canopy’s US division, Canopy USA, will own 100% of Acreage shares.

Major US exchanges don’t allow listed companies to sell cannabis directly in the US — though that may change, if or when the federal government’s push to reclassify cannabis to Schedule III goes through.

Canopy USA is the Canadian firm’s US division, though Canopy can’t officially claim Canopy USA’s revenue on its balance sheet, per Nasdaq rules. 

What they’re saying: “This is a transformative moment for Acreage and Canopy USA that’s been years in the making. With a greatly strengthened financial position and a clear path for joining Canopy USA, our priority is to take advantage of the immediate growth potential in important markets like Ohio where Acreage is ideally positioned as we begin to demonstrate the potential of this powerful ecosystem,” Acreage CEO Dennis Curran said in a statement. 

Back up: The deal was first announced in 2019. 

At the time, it was earth-shattering: It seemed like Canopy Growth, a Canadian company, had finally figured out a strategy to get into the much larger and potentially more lucrative US market without jeopardizing its listing on the Nasdaq.

Read what I wrote in 2019 as news of the deal broke. But that was 2019, and the landscape has changed immeasurably since then. 

Cannabis stocks in the intervening five years cratered as companies contended with a slower-than-expected rollout of legalization, tanking wholesale prices, and executive mismanagement at a number of firms. 

And Acreage — once a leading US cannabis firm — has found profits elusive and seen its debts mount, making this deal with Canopy USA a necessary lifeline for the company.


Quick hits

A Republican led House committee, The House Appropriations Financial Services and General Government (FSGG) Subcommittee, inserted language into its spending bill that would bar federal regulators from penalizing financial institutions that bank with cannabis companies, Marijuana Moment reports. It’s basically a light version of the SAFER Act. Rep. Dave Joyce, a Republican cannabis reformer, chairs the committee. 

Nepal will legalize commercial and medical cannabis cultivation next year. Finance Minister Barsha Man Pun unveiled the plan in the South Asian country’s parliament while presenting the government’s budget estimates, though specific are yet to come. Cannabis grows naturally in Nepal and is suffused with the country’s culture, but the US pressured Nepal to make cannabis illegal in the 1970s. 

An independent advisory panel of the Food and Drug Administration rejected the use of MDMA-assisted therapy for post-traumatic stress disorder, saying that the benefits from the clinical trial do not outweigh the potential risks, reports The New York Times.

Alberta will now allow private label cannabis sales, according to a May 31 bulletin posted by the province’s Gaming, Liquor, and Cannabis agency (ALGC). That will allow cannabis sellers in the state to brand and market more effectively. 

James Canepa, Ohio’s top cannabis regulator, said his agency will start accepting recreational cannabis licenses by Friday, though he didn’t give a specific timeline for when stores will open. He said there will be a “trickle,” at the beginning, and then the bulk of stores would open in the coming weeks and months.

😂 One fun thing

Smart & Safe Florida, the Trulieve-backed organization that is pushing for cannabis legalization in Florida, released a new ad campaign called “Fact.”

📰 What we’re reading

American rehab | The Baffler

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