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  • What does Daylight Savings Time have to do with cannabis? Everything.

What does Daylight Savings Time have to do with cannabis? Everything.

Plus, Ayr Wellness's selloff, TerrAscend wants the TSX, TPCO's legal troubles, and more.

Good morning Cultivated readers,

Before we get into it, I wanted to get a few quick thoughts about reporting on the cannabis sector out of the way given some, uh, reactions to my last newsletter.

It goes without saying, but this is a closely-knit industry.

Too often, cannabis companies and their executives seem to expect that reporters will drink their Kool-Aid and not ask questions.

And there’s a massive imbalance between PRs and reporters (some studies show there’s a 6:1 ratio across industries).

That, in my experience, is probably even more acute in cannabis.

There are a few reasons for this:

  • Few mainstream publications dedicate real resources to industry coverage, by hiring experienced reporters and giving them the tools and incentives they need to be successful on a challenging beat.

  • Cannabis companies themselves are locked out of the standard advertising channels like Google and Facebook, so they rely on getting the word out by getting quoted by friendly reporters — which means they have lots of budget for PR firms.

  • Many journalists covering the space don’t have traditional training in the same way that journalists covering other sectors do. Some end up as the witting or unwitting extensions of the PR machine.1

PRs have an important job to do, and most of the ones I chat with on a regular basis are pretty good at it.

But when I choose to write a tough story, it’s often me on an island versus the resources and legal team of a publicly traded company, their internal communications team, as well as an outside firm.

That’s the reality, and it’s difficult to tell the truth.

The financial media’s job isn’t to cheerlead. We’re not an extension of PR. There are other places to go if you want to read sycophantic interviews and re-hashed press releases.

That means I’m probably going to write some things in this newsletter that are tough or that you might not like. That’s okay. It’s not personal.

That’s especially true if you’re an executive or government official in a position of power, privilege, and responsibility. Getting your work and your actions scrutinized, fairly, by the press is part of that responsibility.

You should want the scrutiny.

You should want to know what people are saying about your company or your policies. You should want to know what your workers think or how your customers and patients find your service and your products.

You should be aware of the intended and unintended consequences of your decisions, in ways that your team might not tell you.

That, to me, is useful information. Accurate, critical reporting is part of creating a healthier ecosystem for the emerging cannabis industry.

That’s my whole goal here.

All that being said, I’m a pretty positive person.

But the responsibilities of my job and the realities of the cannabis industry demand that I stomach conflict, do the hard work, and sometimes call out people and companies directly.

To lay it all out: I don’t have an agenda. I'm okay with saying that cannabis legalization would serve the greater good on multiple fronts, though it isn’t harmless.

But I couldn’t care less if Company A wins over Company B. I don’t have a financial stake in any cannabis companies, nor do I day trade stocks.

I really wouldn’t even mind, personally speaking, if states or the federal government decide it’s in their best interest to take over cannabis sales.2

But I’m not anti-capitalism, either.

While I don’t think this newsletter will make me rich, but I’m pursuing this as a money-making endeavor and not out of the goodness of my own heart.

My intention is not to promote an anti-corporate agenda, but to report accurately on the positives and negatives of our economic system of which the cannabis industry is now a part.

Cannabis is so fascinating to report on because these intellectual debates are alive, pertinent, and so far from settled.

I’m open to all sides and ideas provided they’re in good faith. Credibility as a reporter comes from honesty and openness.

Not to get all Substack-Centrist on you, but I do try really, really hard to maintain that openness, despite the constant drumbeat online to join a tribe.

I have opinions, and I’m clear in this newsletter about when and where I present them, but I believe a good chunk of my credibility stems from my ability to comprehend and distill opposing viewpoints.

My intention is not to bash people unfairly or to dance on graves.

It’s to inform my readers, by calling out the bad stuff and educating them on the good stuff.

I’m also willing to be wrong. I’m doing this in public. If my reporting is incorrect, or you disagree with my takes, reach out! I’m easy to find and always willing to chat or correct the record if needed.

Okay, let’s get to it.

Testing an early morning Wednesday send for this week. Let me know if you like it, or I should stick to the Tuesday/Thursday schedule.

💡What’s the big deal?

What do daylight savings and cannabis have to do with each other?

I was catching up with University of Illinois professor Justin Leiby this week about some cool upcoming projects he’s working on (more on that later) and he brought up a great point.

The best metaphor for federal cannabis legislation is Daylight Savings Time.

Sixty-two percent of Americans want the clocks to stop changing, according to a YouGov poll.

Last year, the Senate passed a bill by unanimous consent — the Sunshine Protection Act, sponsored by Sen. Marco Rubio — to keep Daylight Savings Time.

The bill later died in the House because no one could agree on which time to keep.

Spoiler alert: We’re probably going to change the clocks again this year.

Sound familiar?

Cannabis legislation is overwhelmingly popular.

Fifty-nine percent of Americans say cannabis should be legal for adults over the age of 21. A further 30% say medical cannabis should be legal — and only 10% agree with the illegal status quo, according to a recent Pew poll.

The SAFE Banking Act, a narrow bill that would normalize banking access for cannabis companies, has broad bipartisan support and has passed the House multiple times only to fail in the Senate.

Both parties have offered competing visions for legalization or at least some attempt at federal cannabis reform. It’s not yet a mainstream political opinion, but it’s as close as we’re likely to get in this era of hyper-partisanship.

Over 90% of Americans probably agree that puppies and kittens are super cute, but puppies and kittens are already legal.

Unlike cannabis, legislating around our small furry friends doesn’t carry decades of stigma, much of it racist, like cannabis. It doesn’t take much political willpower to propose legislation that will improve their little furry lives.

Even though the vast majority of Americans agree that something should be done about cannabis, no one seems to agree on what that actually is:

  • Progressive advocates want cannabis legislation to focus on social equity, which means policies focused on giving those impacted by the War on Drugs preferential access to the economic opportunity they hope the emerging industry will create.

    • Part of that is creating new agencies or regulations to reinvest cannabis tax revenue into those communities.

  • The industry itself wants tax reform and banking access, and in some cases, regulatory protection for the monopolies they’ve spent heavily to create in certain states.3

  • Middle-of-the-road politicians and policymakers, at least those I speak with regularly, want to capture tax revenue — ‘pot for potholes’ — and to reduce teen use.

  • Republicans who are pro-cannabis reform generally want to stimulate small businesses and protect a state’s right to choose (not to betray my own politics but yes this is deliberate language).

    • There’s also the libertarian argument, that the federal government shouldn’t regulate what substances Americans put into their bodies.

But Republicans generally say that progressive visions of cannabis legalization create too-large tax burdens and will further bloat an already bloated federal government by creating more bureaucracy.

Progressives say they won’t move ahead with industry-friendly reform until social equity is implemented first, full stop. Remember Sen. Booker’s comments?

Thus, an impasse.

🌿 Jer’s take

It’s not my job to take a position here, but I will point out the purpose of democracy is compromise.

America isn’t a winner take all system and both sides are going to have to give a little bit, or a lot a bit, in order to make legalization work.

But political willpower is low. Like changing clocks, the US government has bigger fish to fry than legalizing cannabis. I mean, a Russian fighter jet collided with a US drone over the Black Sea this morning.

Sure, the federal government is supposed to walk and chew gum at the same time, but politicians only do that if there’s tangible political gain.

Cannabis isn’t a wedge issue for either party. I haven’t seen much convincing evidence that cannabis really turns out voters in big, federal elections on either side of the issue.4 

There also aren’t a lot of clear political benefits to supporting cannabis other than likes and retweets, of which there are probably far too many.

It’s a complex issue to get right, where two sides both agree on the underlying idea but are diametrically opposed in how to do it.

Again, like changing clocks.

It may end up being an issue that gets settled in the courts, unfortunately, rather than through a proactive Congress.

Listen to people smarter and more informed than I am:

  • Oregon Rep. Earl Blumenauer, a longtime liberal champion of cannabis reform, took the stage at Austin’s SXSW festival this weekend and criticized Booker and Schumer’s inability to get cannabis reform passed despite overwhelming popularity and control of both chambers.

  • South Carolina Rep. Nancy Mace, a key Republican proponent of cannabis reform, said on the same stage that if nothing gets done before June, the presidential election is going to consume Washington’s oxygen.

All signs point to us changing our clocks again in November.

Likewise, all signs point to the continued federal prohibition of cannabis for the foreseeable future.

Help me grow my reach. Share whatever you found interesting in this newsletter.

📉 Market moves

What happened: Cannabis earnings season is chugging along. 

Ayr Wellness reported its Q4 and full-year results last Thursday. You can see the full results here for yourself.

It wasn’t the prettiest picture for newly-minted CEO David Goubert.

The Florida-based cannabis firm posted $124.6 million of revenue on a $166.4 million net loss in the last quarter of 2022 (much of that due to a $149 million non-cash impairment charge).

The stock has taken a nosedive this year: It’s down around 42% as of market close on Tuesday.

Why it matters: Ayr is one of the largest and most well-capitalized US cannabis companies, or MSOs.

The sell-off of Ayr’s stock is another sign that investors aren’t buying into the long-term potential of cannabis anymore. They’re looking at the balance sheet, and what they see across the industry is mostly unimpressive.

There’s too much regulatory uncertainty (see above), and too many companies have failed to diligently manage their balance sheets quarter-over-quarter.

🌿 Jer’s take

Look, I’m far from a financial analyst. But I know enough to say that while Ayr’s earnings weren’t stellar, other cannabis companies have posted far worse results.

Investors are spooked on cannabis stocks and will continue to be. That’s not my opinion, that’s how investors I speak with outside of cannabis view it.

They’ll look for any opportunity to sell at the first sign of instability, and that’s what happened with Ayr.

I don’t want to beat a dead horse, but I wouldn’t want to be a public cannabis company at the moment.

It’s a really difficult environment.5 

Cannabis companies like Ayr aren’t going to trade on fundamentals, as they say on the Street, even though there are signs of promise on the balance sheet — look at the (adjusted) EBITDA margin.

Right now, it’s more like Tulip Mania. And it’ll continue to be until we get some federal certainty, which isn’t coming anytime soon.

TerrAscend wants the TSX

What happened: US cannabis company TerrAscend, which is partially owned by Canadian cannabis giant Canopy Growth, applied yesterday to list its shares on the TSX.

Why it matters: Like other US cannabis stocks, TerrAscend trades on the relatively illiquid Canadian Securities Exchange and over-the-counter in the US.

Getting listed on the TSX would be a huge step for TerrAscend, and for US cannabis companies more generally.

It would allow them to tap much deeper-pocketed institutions that only play on major exchanges, and, perhaps most importantly, would open their shares up to a much larger swath of retail investors.

The law firm working on the deal, Cassels Brock & Blackwell, is the same firm that led Canopy’s pathbreaking purchase of options in US cannabis company Acreage Holdings way back in 2019.

🌿 Jer’s take

Cannabis is still federally illegal in the US, and I’m not sure why the TSX’s regulators would be comfortable with listing TerrAscend shares in the first place.

Nasdaq has already said no. It’s far from a done deal.

But Cassels, the law firm, is nothing if not creative so I wouldn’t put it past them to figure this all out.

If they do, expect every US cannabis company to follow suit.

They all want a coveted “uplist” to the Nasdaq, but that would require federal reform — or for the Nasdaq to take a risk like it never has before, which won’t happen.

The TSX is the next best thing. And it could be a massive step in getting cannabis stocks to trade on, uh, the fundamentals instead of whatever the fuck is going on now.

What do you think will happen? Will the TSX allow TerrAscend to list? What’s the biggest gain for US cannabis companies to get access to the TSX?

Notable upcoming earnings:

🧑‍⚖️ Legal matters

What happened: A lawsuit accuses Jay-Z’s cannabis firm, The Parent Company, of illegally shipping cannabis across state lines, filing inaccurate financial reports, and engaging in gender discrimination, reports SF Gate’s Lester Black.

The lawsuit was filed by Cathi Clay, a former vice president at TPCO and Jay-Z’s cannabis brand, Monogram, which TPCO owns.

Why it matters: Shipping product across state lines aside — yes it is highly illegal and yes, lots of cannabis executives do this every single day for events and promotions — the lawsuit paints a picture of a boy’s club among the upper echelons of TPCO.

Among other details in the lawsuit:

  • CFO Mike Batesole “made many inappropriate comments about women, hiring ‘housewives’ to perform accounts payable, people of color and skill sets of employees.”

  • Clay was reprimanded after warning executives that filings with the U.S. Securities and Exchange Commission in 2021 and 2022 were inaccurate.

  • Clay also alleged that TPCO executives were demeaning toward her.

🌿 Jer’s take

It’s a bad look for an industry hurting for credibility.

I don’t know much beyond the lawsuit, and I’ve since learned from reporting on cannabis for years that lawyers can pretty much write whatever they want in a complaint as long as they reasonably believe it to be true (hint: they don’t).

But if these allegations are true, TPCO’s corporate culture needs an overhaul.

I don’t know what Jay-Z’s level of day-to-day involvement in the firm is, but it’s certainly not something I’d want to lend my name and credibility to.

Other than that, it’s best to let the courts decide, here.

There are folks on TPCO’s board who I know read this newsletter, and while I don’t expect them to speak out about ongoing litigation, I’d suggest some more adult leadership is sorely needed.

🧪 Science & research

What happened: Raphael Mechoulam, an Israeli scientist at the Hebrew University and Holocaust survivor who in 1963 first isolated delta-9 THC, the chief psychoactive component of the cannabis plant, died last week at the age of 92.

Why it matters: Mechoulam is considered the ‘father’ of cannabis research by many. He is the founding member of the International Association for Cannabinoid Medicines and the International Cannabinoid Research Society, and is credited with spurring a wave of cannabis research — and patents — in Israel.

📜 Policy moves

  • The UN Commission on Narcotic Drugs is meeting this week to discuss cannabis and other drug-related topics. Cannabis Wire’s got everything you need to know.

  • Speaking of, the UN’s International Narcotics Control Board remains stuck in 1987: In a press release, it reiterated its 1961 stance that cannabis is an addictive drug, and said — despite evidence to the contrary — that legalizing cannabis leads to increased use among teens and an increase in traffic fatalities.

    • We’ll fact check more of this crock of shit in another newsletter. An international agency using bad data to push an agenda? Color me surprised!

  • President Biden’s budget will keep blocking cannabis sales in DC, Marijuana Moment reports.

  • Minnesota is reworking its proposed legalization bill, MinnPost Reports.

  • Kentucky’s Senate passed a medical cannabis bill for the first time.

📚 What I’m reading

Bloomberg’s Peyton Forte and Angel Adegbesan have an interesting story that gets to an elemental question in the cannabis industry: Is it ESG or is it a vice? Maybe it’s both!

The cannabis industry has tried to make inroads with institutional investors by burnishing its image as an ethical and green investment.

But exchange-traded funds that target investments meeting environmental, social and governance standards have to consider pot’s precarious legal status, and its unknown health impacts as studies are ongoing into mental and physical effects of high-potency THC

The Economist reports on a troubling trend: Persistent cannabis users are difficult to anesthetize.

A study published in 2019 found that patients who used marijuana on a daily or weekly basis needed up to three times the typical anaesthesia dose to stay under while they were in the operating theatre. Smoking weed before surgery can make patients confused, irritable and sometimes even violent when they wake up. But the problems do not end there.

😎 One cool thing

Ski and mountain culture magazine Mountain Gazette (print is not dead!) is teaming up with Dad Grass to offer Mountain Grassette “Safety Kits” of hemp joints.

Any skier worth their salt knows what a safety meeting in the trees entails. Now you’ve got the tools to do it.

Dad Grass says the safety kits are for “the shreddy and heady girls and guys who make mountain towns tick.”

Sign me up.

🗓️ Cannabis calendar

  • The Bronx Cannabis Hub is hosting a panel tomorrow at 6 PM for those interested in applying for CAURD licenses in New York.

  • UVM is offering two cannabis certificate programs, a Cannabis Plant Biology certificate and a Cannabis Science and Medicine Certificate. I took the Plant Biology track last year as a media fellow, so if you’re interested — reach out!