This is a copy of the March 10th edition of our weekly Newsletter, which we have been publishing since October 2015.
This week’s news that FDA Commissioner Scott Gottlieb will be stepping down was disappointing. While hemp was legalized in the Farm Act in December, the legal implications for CBD derived from industrial hemp weren’t clear. Immediately after President Trump signed the Farm Act, Gottlieb penned a statement discussing the FDA’s role as a regulator. It’s not clear how things would have played out under his continued leadership, but we think the industry needs clarity at the federal level. Most believed that the path forward under Gottlieb’s FDA would allow for CBD to be sold as nutritional supplements under certain conditions but that the FDA would play a greater role on the regulatory side.
One thing is clear: In addition to the lack of clarity at the federal level, the status of hemp and CBD at the state level is in disarray. Many states have stated that while hemp may be federally legal, it is not legal yet. For example, this past week, Florida’s Agricultural Commissioner, Nikki Fried, said the state may soon try to halt sales of CBD products, saying “the sale of CBD products is not currently legal in Florida until state hemp legislation is passed.” One of the big misconceptions over the past several years has been that CBD derived from industrial hemp is “legal in all 50 states”, but that has never been the case and still isn’t. Unfortunately, more work needs to be done, but we are moving in the right direction.
There is no doubt that the CBD market is large and growing rapidly, but it’s a wild west out there. There are several responsible purveyors, but there are also many fly-by-night operators just looking to capitalize on CBD’s popularity. Product tests have revealed that much of what is on the market has different potency than what the label says, and there have been many companies making health claims, which is clearly not allowed. In this largely unregulated market, many products are sold without lab testing. One publicly-traded company has been accused of having dangerous ingredients in their products. For the industry to move forward, we will likely need to see better regulation.
Despite all of the legal uncertainty, we have noticed several publicly-traded companies suddenly morph into CBD companies, and investors have piled into some of these stocks just on the announcements. Some seem dubious, especially the many penny stocks, while others appear to be more real and are listed on higher exchanges, like the Nasdaq or the NYSE American. For example, Level Brands, which trades on the NYSE American, recently acquired a CBD company, and this is now their main line of business. Direct marketing company Youngevity trades on the Nasdaq. Village Farms, which trades now on the Nasdaq and owns half of a Canadian joint venture that has an ACMPR license, is talking up its plans to go into the hemp from CBD business in Texas. Of course, NYSE-listed Canopy Growth is doing the same in New York.
We think that there may be some opportunity going forward for some of the CBD companies that are currently traded on the OTC to uplist, as the major exchanges are all permitting similar companies to remain on their exchanges, even without clarity over the federal rules for selling CBD. One very obvious example is CV Sciences, which will be reporting this week and has already stated its intention to uplist. Some expect it could be announced this week. Just like the pending MTech acquisition of MJ Freeway, which will result in MJ Freeway being part of the newly named Akerna that will trade on the Nasdaq, the uplisting of CV Sciences would serve as a sign that qualified companies not directly in violation of federal laws can access major exchanges, a big improvement in terms of building larger investor bases and more readily attracting capital.
To learn more about TerrAscend, a client of New Cannabis Ventures, which recently announced the purchase of California retailer Apothecarium for $188.4 Million, visit the company’s Investor Dashboard that we maintain on its behalf and click the blue Follow Company button in order to stay up to date with their progress.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
- Exclusive: 43 Top Revenue Generating Cannabis Stocks Ranked as of March 1st
- Exclusive: Air Force Vet Turned Cannabis Consultant Discusses New Investment Funds and Industry Risks
- Altria Effectively Takes Control of Cronos Group with C$2.4 Billion Investment
- Aurora Completes Whistler Medical Acquisition
- Cannabis Producer Harvest One to Acquire Delivra in $19 Million Stock Deal
- MedMen’s Stock Promotion Draws Regulatory Scrutiny
- Nielsen Partners with Headset for Cannabis Data Analytics Offering
- Exclusive: Women’s Wellness Company Garden Society Looks to Win the California Cannabis Market
For investors interested in the cannabis industry and for operators looking to tell their stories to potential investors, there is no better event than the Benzinga Cannabis Capital Conference. After highly successful events in Miami and Toronto in recent months, Benzinga returns to Toronto at the Fairmont Hotel next month, and we are excited to partner with them again. For high quality companies interested in presenting, please email PatrickLane@Benzinga.com to learn about the many opportunities available.
Tickets are on sale, and our readers can save 20% off of Early Bird rates by using the code “NCV”. We look forward to seeing you there!
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Alan & Joel