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Late Friday, Delaware moved close to becoming the 22nd state that has legalized for adult-use. The governor, John Carney, indicated that he wouldn’t take action on two bills, and this means that the state, which has medical cannabis already, will become legal on Wednesday. Carney doesn’t support legalization, but he didn’t veto it like he did last year.
The country has come a very far distance in the 11 1/2 years since the citizens of Colorado and Washington voted for cannabis to become legal. The country now has 44% of the states that will be legal for adult-use this week, so the addition doesn’t really matter much in our view. The state is very small, with just 1 million residents.
What should investors think about this? Will it help the market, which has been in decline for 26 months now and has fallen more than 90% as measured by the New Cannabis Ventures Global Cannabis Stock Index? As much as we hope so, we don’t think it will matter much, though the low population may not be as big of an issue as it seems. Philadelphia, which isn’t legal yet for adult-use but has 1.6 million residents, is a 40-minute drive to Wilmington, Delaware’s largest city.
Already the nation’s largest state, California, is legal, but the state is having a tough time on the cannabis front. Among the top 5 states in population, #2, Texas, and #3, Florida, don’t have adult-use programs. Neither does #5, Pennsylvania. New York, at #4, is having a very tough time as well. The three that don’t have adult-use yet all have medical programs. 2 of the states, Florida and Pennsylvania, are considered likely to legalize for adult-use soon, but Texas is unlikely to do so.
We are concerned that Florida, which has a very active medical program that is quite mature, won’t legalize soon due to its governor, Ron DeSantis, likely runs for President in 2024. The state has over 810K medical cannabis patients, and this is about 3.7% of the population, a large percentage. Pennsylvania had over 714K last May, and this is about 5.5% of its population. Both states would likely quickly serve the expanded market due to the large number of operators, both cultivation/production and stores.
Texas has a much less mature medical cannabis industry than the other large states, and there are less than 12K active patients. This is only 0.04% of the state’s population! Texas would be a great state to legalize for adult-use, but it’s very unlikely to happen. There is no legal process for the voters to vote for it. Any legalization must come from the legislature. The governor of Texas, Greg Abbott, is very much against cannabis, and he would veto any legislation. The medical program has improved recently, but it’s still really bad. The state expanded the number of conditions that enable treatment, but it remains quite limited. Worse, the amount of THC in cannabis oils is limited to just 1%
Florida or Pennsylvania legalizing for adult-use would be a lot more helpful for the industry than Delaware. They are more likely to do so than Texas, which would be an even better state in our view. Looking at the next five largest states, Ohio, Georgia and North Carolina aren’t yet legal for adult-use. Ohio could move in that direction.
While it would be nice to see more states legalize adult-use, we don’t think that it’s necessary for that to happen. We continue to hope for the elimination of the onerous taxation, 280E, or the ability of the operators to trade on the NASDAQ or the NYSE. The cannabis sector needs institutional investors, and either of these would help attract them in our view.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
NCV keeps its readers informed of the revenue-generation by leading companies, and we reviewed recent reports and shared the outlook for upcoming quarterly financial reports in May.
Canadian cannabis sales were ahead of expectations, but they fell sequentially in February, a short month. The annual growth was 12.8%. We broke it down for the leading provinces, which grew 8-21% from a year ago.
Curaleaf, which shocked investors in the prior week that the state of New Jersey had decided against renewing its adult-use licenses, shared the good news that the state had changed its prior decision.
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Alan & Joel
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