VIDEO: The Weekly Weed Report (2-22-22)
Welcome to my recurring video presentation that examines the latest developments of interest to investors in the cannabis industry. The article below is a condensed transcript.
Debt versus equity…
The prohibition of marijuana at the U.S. federal level limits financing options for marijuana companies and substantially boosts their capital costs, with debt now accounting for 38% of financing, up from 18% in 2018, according to research firm New Frontier Data.
Marijuana companies are increasingly turning to venture capitalists as opposed to issuing equity. Funding cannabis start-ups has become a hot activity.
In the past, the cannabis industry has struggled with access to capital, due to the conservative nature of financial institutions and the federal ban on pot in the U.S.
However, both the debt and VC markets are opening up as marijuana becomes a respectable business. The trade off is the loss of management control for marijuana entrepreneurs.
Marijuana tax revenue on the rise…
As retail revenue continues to grow in legal cannabis, so will jobs, business opportunities, payroll and of course tax revenue produced for the federal government (see chart).
Total federal tax revenue came to $2.9 billion in 2017. Tax revenue is expected to grow consistently reaching $6.7 billion by 2025. Roughly 200,000 jobs exist in today’s legal cannabis market. By 2025, projections anticipate 630,000 industry-specific jobs.
Taking it to the streets…
Despite the rapid pace of legalization and the emergence of marijuana dispensaries, most Americans still buy their pot away from state-legal stores (see chart).
As state governments increasingly tax cannabis sales, they’re driving up the cost of the product, prompting people to seek cheaper, untaxed sources of weed.
A Hawaii Senate committee last week approved legislation to allow people 65 years and older to automatically qualify for medical marijuana, regardless of whether they have a diagnosed condition that would make them eligible.
Under existing Hawaiian law, only patients diagnosed “as having a debilitating medical condition” by a doctor qualify for the program. That would be expanded to also include anyone “who has reached the age of sixty-five.” This proposal amounts to de facto legalization for the elderly (see my video for further details).
A key Maryland House committee last week approved two bills to place a cannabis legalization referendum on the November ballot and begin establishing details for the program if voters approve.
The twin proposals are expected to be taken up on the floor of the Maryland House this week.
The first bill would ask voters to approve an amendment to the state’s constitution to legalize cannabis use and possession by adults at least 21 years old. It also would direct lawmakers to set laws to “provide for the use, distribution, regulation, and taxation of cannabis within the state.”
The second measure is designed to lay the groundwork for that goal. It specifies that the purchase and possession of up to 1.5 ounces of cannabis would be legal for adults, and it would eliminate criminal penalties for possession of up to 2.5 ounces. Past convictions for conduct made legal under the proposed law would be automatically expunged, and those currently serving time in prison for such offenses would be eligible for resentencing.
The New Hampshire House of Representatives last week approved legislation to legalize marijuana and conduct sales exclusively through state-run stores.
Under the proposal, which must still go before the House Finance Committee and then undergo another floor vote before advancing to the Senate, adults 21 and older would be allowed to buy marijuana from state-run dispensaries operated by the New Hampshire Liquor Commission. They could possess up to four ounces, but home cultivation would still be outlawed.
As I’ve just made clear, the legalization of marijuana is a social, political and financial revolution that’s making early investors rich. We’ve pinpointed a trailblazing marijuana biotech that’s on the verge of becoming “The Pfizer of Pot.” Click here for details.
John Persinos is the editorial director of Investing Daily.