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Friends,
The big news this week was an extension of the huge news that hit in August, with President Trump apparently about to issue an Executive Order now to push cannabis from Schedule I to Schedule III. Not so surprisingly, cannabis stocks have soared, with the NCV Global Cannabis Stock Index, now at 8.23, up 35.4% in December and now up 19.6% year-to-date. MSOs, which will benefit from 280E taxation going away if this goes through, are up even more, with MSOS, at 6.69 up 92.2% in December and 75.6% year-to-date. The ETF, which closed at $6.87 on Election Day in 2024, fell all the way to $2.02 in March.
When the news hit in August, I ran a newsletter suggesting that investors consider cannabis REITs. After moving higher initially, they have lagged since then:
Since 8/13, MSOS has advanced 28.4%, and the Global Cannabis Stock Index is up 15.9%. Only one of the four cannabis REITs has rallied, Innovative Industrial Properties, and it’s up only 6.9%. The very weak one has been Advanced Flower Group, which is in the process of becoming a Business Development Company
I continue to believe that the elimination of 280E taxes will be good for the cannabis REITs, which include two equity REITs and two mortgage REITs. I have two of them, IIPR and REFI, on my Focus List at 420 Investor, and my model portfolio holds them both right now. I am overweight relative to the index in Ancillaries, and I am underweight all other sub-sectors, including MSOs and Canadian LPs:
The two REITs that I include on my Focus List make up 27.8% of the model portfolio and are boosting my Ancillary exposure. All four REITs are in the Global Cannabis Stock Index and make up 13.6% of the index, so I am currently very overweight. IIPR, which trades on the NYSE, trades at 0.7X tangible book value. REFI, which trades on the NASDAQ, trades at 0.9X. Both stocks are paying very high dividends that may be at risk. So far in 2025, both stocks are down in price by more than 12%, and the other two cannabis REITs are down more. Even with dividends included, all are down year-to-date:
The two REITs that I follow closely serve MSOs, with IIPR owning the properties and leasing them and REFI holding mortgages that MSOs take out against their properties.The poor financial health of their customers has weighed on both stocks. If 280E goes away, the customer will be healthier. To be sure, if 280E remains, there will be challenges, but it could be a lot worse for the MSOs that are saddled with debt and unpaid taxes. Rescheduling will not automatically lead to NASDAQ accepting MSOs for trading, nor will it lead necessarily to SAFER Banking, an act that might increase competition for the REITs. Cannabis REITs, down still year-to-date and down a lot over longer periods, seem attractive for cannabis investors here to me.
This battle to end 280E taxation has been rough. Let’s hope it is ending!
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Michigan Cannabis Sales Slipped in November
Capital Raises
Trulieve Borrows $140 Million at 10.5%
M&A
Canopy Growth to Acquire Canadian Cannabis Producer
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