Sale On American Cannabis MSO Stocks Continues: Now Down 54% YTD
There currently isn't much optimism in the American cannabis MSO sector and that has been reflected in their stock prices which continue to decline week after week and, once again, touched 52-week lows this week declining a further 2.5%. The sector is now down a whopping 54.2% YTD. This article has the details.
Cannabis stock performance has largely echoed that of the broader market, albeit with much more dramatic swings, but the stocks have also suffered as legislation to legalize weed on the U.S. federal level languishes in Congress.
- In February, House members voted to include the banking provisions of the Secure and Fair Enforcement Banking Act of 2021 (the SAFE Banking Act) that would have allowed legal cannabis operators to do business with U.S. financial institutions, in the Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act (the COMPETES Act) but just this week it was stripped from the Act at the request of Republicans.
- In April 1st, the U.S. House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) BUT the introduction of the Senate's version of the MORE Act, called the Cannabis Administration and Opportunity Act (CAOA), was postponed until later in the session by Senate Majority Leader Chuck Schumer to give him more time to rally support for the bill from a few Republicans to ensure its passage - and that is not a foregone conclusion. If passed, CAOA would a) end the federal ban on cannabis, b) leave legalization up to the states, c) decriminalize marijuana, and d) would allow banks and other financial institutions to provide banking services to cannabis companies which, currently, are subject to criminal prosecution under federal law.
Given the above events, there currently isn't much optimism in the American cannabis MSO sector and that has been reflected in their stock prices which continue to decline week after week and, once again, touched 52-week lows this week declining a further 2.5%. The sector is now down a whopping 54.2% YTD. For the record, the munKNEE LP Pot Stock Index of the 5 largest Canadian pure-play cannabis companies was advanced 13.1% this week but remains down 51.3% YTD (see article here).
The American MSO Pot Stock Index consists of the 13 largest pure-play, vertically integrated multi-state operators whose stocks trade for at least US$1/share, have a market cap of at least US$200M (Goodness Growth is less but will soon be owned by, and incorporated into, Verano), and trade on one or more of the Canadian and/or American stock exchanges.
Below are the performances of the constituents in the munKNEE American MSO Pot Stock Index YTD, in descending order:
- Goodness Growth (GDNSF): -17.0% YTD
- Chance of Financial Distress in the next 2 years: +74%
- Analyst Consensus: None following GDNSF
- Acreage (ACRDF/ACRHF): -31.9% YTD
- Curaleaf (CURLF): -42.6% YTD
- Verano (VRNOF): -44.8% YTD
- Trulieve (TCNNF): -49.9% YTD
- Columbia Care (CCHWF): -51.4% YTD
- Jushi (JUSHF): -53.5% YTD
- TerrAscend (TRSSF): -55.7% YTD
- Planet 13 (PLNHF): -57.4% YTD
- Cresco (CRLBF): -58.2% YTD
- Chance of Financial Distress in the next 2 years: +71%
- Analyst Consensus: None following CRLBF
- Green Thumb (GTBIF): -61.6% YTD
- Ayr Wellness (AYRWF): -65.5% YTD
- Ascend Wellness (AAWH): -67.3% YTD
Despite the hurdles and delays in the passing of federal legalization, however, state-level momentum is projected to continue this year after an eventful 2021 during which adult-use cannabis became legal in Connecticut, New Mexico, New York, and Virginia bringing the total to 18 states, the District of Colombia and Guam. (Recreational marijuana sales commenced in New Jersey in April of this year.)
Mid-term elections usually result in an increase in the number of states legalizing cannabis as the result of ballot initiatives and 2022 is no exception. Adult-use ballot initiatives are being proposed in Arkansas, Maryland, Ohio, and South Dakota and both adult-use and medical ballot initiatives are being proposed in Idaho, Missouri, Nebraska, and Oklahoma.
These legislation reform initiatives at the state level, for both medical and adult marijuana use, may act as a tailwind for legalization at the federal level.
If history is any guide, however, the emotional negative reaction to the delay in the introduction of favorable legislation suggests that now might be a good time to consider taking positions in one or more of the cannabis stocks mentioned above as there could well be a significant runup in their prices just prior to the introduction of the proposed CAOA scheduled before the end of July.
Visit munKNEE.com and register to receive our free Market Intelligence Report newsletter (sample more
Comments
