You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

Hemp was legalized seven years ago. Congress clearly did not know exactly what it was doing at the time, but it sounded like a good thing at the time, the Farm Act of 2018. There was not so much excitement broadly from the investor perspective, though there were several CBD-focused companies that enjoyed this change. These stocks did well initially, but they have plunged and are all tiny companies that should not be publicly traded.

There have been several challenges. CBD has a good perception among consumers, and the benefits go well beyond the proven health issues, like treating epilepsy (Jazz Pharma, which bought GW Pharma several years ago, sold over $300 million of Epidiolex in Q3). Lots of people use CBD for many reasons, but the FDA has been uninvolved because it is too difficult to figure out how to administer regulation of it and asked Congress for help in early 2023.

The failure of the federal government to properly regulate CBD is just part of the problem. The law was poorly written, and companies figured out ways to develop other cannabinoids from hemp, including THCA. No one was talking about this after the Farm Act passed, but sales of other products beyond CBD took off due to technology as well as the development of synthetics. The hemp cannabinoid industry is booming, but remains unregulated. Most states have legalized cannabis for medical use, and many have implemented adult-use programs. Unlike the makers and sellers of hemp products, the companies that are part of the state-regulated programs face very high levels of regulation. They also face 280E taxation.

About fourteen months ago, this newsletter discussed the threat from and the opportunity with hemp. At the time, no major cannabis companies were involved in hemp, but that quickly changed as the three largest MSOs all got involved. Curaleaf took one of its Florida medical cannabis dispensaries and turned it into a hemp store. It is also making hemp-based products. Trulieve launched a THC beverage business, and Green Thumb Industries worked with a company that was acquired by a publicly-traded company, Agrify. Agrify has become RYTHM, Inc., which is controlled by GTI. None of these companies provide much in terms of details about revenue or even the number of units sold. Canadian LPs Canopy Growth, Organigram and Tilray Brands are selling THC beverages in the U.S.

This week, another MSO, MariMed, announced that it was entering the hemp market. Glass House Brands, which forged a relationship with UC Berkeley, could enter the industry as well.

In that piece from August 2024, I suggested that there were good reasons for state-regulated cannabis companies to move beyond their comfort zone. The hemp industry remains unregulated by the federal government, and there are potential risks to it that the federal government will make some changes that would make it more difficult for the operators. I would like to see it become properly regulated. There are too many unregulated sellers and manufacturers that are selling bad products to consumers. Many states have been pushing back against the hemp industry as well.

One MSO, Jushi Holdings, has filed lawsuits in Pennsylvania and in Virginia against retailers for not properly following the cannabis THC laws in those states. This is not the only sign of war, as many decry the impact of hemp-based cannabinoids on the revenue of state-regulated cannabis companies.

This battle is bad for operators, but it is also bad for consumers in my view. How it plays out is very uncertain, but hopefully the federal government will get more rational about cannabis products. Consumers deserve safe products that are easy to understand and also that are available in restaurants and stores.

Sincerely,

Alan

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Exclusives

October Was a Tough Month for Cannabis Stocks

Financial Reports

Cannabis REIT Q3 Revenue Falls 15%

Cresco Labs Q3 Revenue Falls 8%

Curaleaf Q3 Revenue Falls 3%

Green Thumb Industries Q3 Revenue Grows 2%

Trulieve Q3 Revenue Rises 1%

Exclusive article by Alan Brochstein, CFA

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email