Higher Exchanges

With the election just days away, we are happy to have Hirsh Jain, Founder of Ananda Strategy, join us to break down all the races. We start with the Presidential election and handicap the outcome and potential consequences of a Harris or Trump victory. 

Cannabis is a state-led growth story, and several new adult-use states are on the horizon, with none more significant than Florida. We assess the chances that Amendment 3 will be passed and dig into smaller states like North Dakota, South Dakota, Nebraska, and Arkansas. 

Finally, we cover the control of Congress and potential implications for SAFER Banking and other legislative progress. 

This week's show has two special guests: Dan Neville, CEO of AFC Gamma, and Brady Cobb, Founder and CEO of Sunburn. The episode begins by discussing the vibes in Florida as we head into the adult-use vote on November 5th. 

Brady shares his optimism and how they are preparing for the potential adult-use launch. Dan offers his perspective on the Sunshine State, the deals they have done, and what they look for when evaluating Florida operators. 

Brady drops off, and we dig deeper into the AFC Gamma business and how it differs from other debt funds. Dan explains how they underwrite investments and manage risk in the portfolio. The episode concludes with Dan sharing what he sees as a favorable and unfavorable environment for their portfolio and his views on the potential catalyst ahead in 2025. 

Morgan and Jesse are back from a busy week at the Benzinga Cannabis Capital Conference in Chicago. This week's show focuses on what they learned at the event, and they both share their three biggest takeaways. Topics include institutional involvement, hemp, M&A, Ohio, and more. 

The guys also discuss the Gartner Hype Cycle and how we feel deep in the trough of disillusionment. Investors feel impatient and fatigued, which contrasts with what may be an exciting set of catalysts as we head into 2025. 

With no guests this week, Morgan and Jesse had time to catch up on several topics. The episode starts with an update on a recent X poll about moving off Spaces and how the podcast may evolve. Jesse and Morgan are heading to the Benzinga Cannabis Capital Conference in Chicago next week and shared what's on their schedules and how to make the most of the event. 

It would not be a cannabis podcast without addressing politics, and the guys talk about the Democrat's recent comments. Jesse stumps Morgan by asking which candidate is better for cannabis and then has difficulty answering the same question. 

The rest of the show focuses on California. Statehouse appears to be heading to receivership, and Morgan explains the history of the business and the steps that contributed to the company's problems. They also review the demise of Ignite and the incremental progress the state is making with removing double taxation and allowing cannabis cafes.  

This week's show begins with a discussion about Senator Wyden's Cannabinoid Safety and Regulation Act, which proposes more regulation for the hemp industry. Jesse and Morgan review the key points and how they may impact the intoxicating hemp market and legal cannabis business. 

Grown Rogue's CEO, Obie Strickler, joins the show to share how the company has cultivated a low-cost flower production advantage and expanded to new markets. We review the company's core operations in highly competitive Oregon and Michigan markets and attempt to get Obie to explain the secret ingredient to their low-cost advantage.

The conversation evolves into exploring expansion opportunities in Illinois and Michigan. We also cover the company's strategic advisory agreement with Vireo Growth in Minnesota and Maryland. Finally, Obie shares what risks an investor may consider when investing in Grown Rogue. 

 We apologize for Obie's connection issue. We record live on X, and this week, the internet was not our friend. 

This week’s show starts with a conversation about the large number of CEO replacements this year. Thus far, AYR Wellness, Ascend, Curaleaf, and The Cannabist all have new leadership. Jesse and Morgan discuss what's driving the changes and what makes a qualified cannabis CEO. 

Emily Paxhia, co-founder of Poseidon, joins 20 minutes into the episode live from Florida. She's been in Tallahassee and shared her perspective on the obstacles in getting Amendment 3 passed and potential hurdles with the implementation. We also dug into what it takes to succeed in Florida and the challenges and opportunities associated with mandatory vertical integration. Finally, Emily explains how what makes a good medical dispensary may not translate to adult use and how the state's over 130 million annual tourists impact the cannabis industry. 

Morgan and Jesse just returned from Glass House Brands' first analyst and institutional investor day and were joined this week by Glass House CEO Kyle Kazan and President Graham Farrar. The group recapped the day and shared some of the highlights from the presentations and tours. 

Glass House is a single-state operator focused on the California market. We walked through the state of California cannabis and the challenges and opportunities it presents. Kyle and Graham helped us better understand the retail climate and CPG opportunities and explained their continued success in the wholesale market. 

The company is in the process of building out Greenhouse Two, which is a special greenhouse with almost 11,000 HPS lights supplementing the power of the sun. Glass House is considering using this facility to grow Farm Bill flower, or what some might consider THCA flower, that is compliant with the 2018 Farm Bill. 

We cover the potential to enter new states with Farm Bill flower, direct-to-consumer options, and how pricing compares to California cannabis. The team also explained the risks of the dynamic political environment and the risk of potential changes to the Farm Bill language. For this reason, they are weighing all options before making a final decision to enter this market. 

Finally, it would not be a cannabis conversation if we didn't discuss politics, and Kyle and Graham shared their thoughts on Schedule III timing and the path to higher exchanges. 

Jeff Schultz, Partner at Foley Hoag, joins the show this week to help us understand the complex political catalysts ahead for cannabis. We start with rescheduling, and Jeff offers his perspective on the ALJ hearing and when we may see a final ruling. A Garland Memo may follow the final ruling and Jeff explains the memo's importance. 

SAFER Banking may become topical again late this year. We discuss the importance of SAFER in light of Schedule III, and how it would complement a Garland Memo. A combination of Schedule III, Garland Memo, and SAFER my unlock uplisting, and we debate what's needed to get to higher exchanges and when this may happen. 

We wrap with a conversation about state catalysts and dig into adult-use opportunities in Florida, Pennsylvania, Minnesota, and a handful of smaller states. 

The rescheduling process got extended with the announcement of the ALJ hearing on December 2nd. The show starts by discussing whether this is categorically bearish or if going through a more thorough process may yield a net benefit. Jesse and Morgan debate whether this impacts the broader thesis and the types of companies you should own. 

David Goubert, CEO of Ayr Wellness, joins the show about twenty minutes in and shares their perspective on the ALJ hearing. The conversation transitions into AYR's 2Q24 results and steps they can take to drive more revenue and boost margins. 

AYR operates 94 dispensaries, and 76 (80%) are in states that may soon transition to adult-use sales. David gives his thoughts on opportunities in Ohio, Pennsylvania, and Florida, where AYR operates 65 stores. Finally, the guys talk about the intoxicating hemp market and how AYR may approach this emerging category. 

This week, we were joined by Nicholas Gastevich, Vice President of V. Gastevich Investments, known as CannaVestments on X and Reddit. Gastevich is a seasoned cannabis investor known for his excellent earnings analysis and industry perspective.

The conversation began by discussing 2Q earnings results. We saw more differentiation this quarter between the tier 1 and tier 2 MSOs, especially in gross and adjusted-EBITDA margins. Tier 1 gross margins averaged 52%, versus 41% for tier 2s.

Gastevich shared how CapEx has been declining since 2021. 2Q averaged $128 million, which is up 33% sequentially, but down 67% since 2021. We debated the tradeoff between spending more on growth versus focusing on generating cash flow.  

Ohio opened for adult-use sales and is the biggest state-led catalyst this year.  The Buckeye state is an approximately $600 million medical market bordered by four non-adult-use states. We expect the Ohio market to triple in size quickly, and sales may accelerate in September when pre-rolls and concentrates begin being sold in dispensaries. We covered who is best positioned to succeed in Ohio and who may be leaders in the wholesale market. 

Finally, we explored opportunities for cannabis companies to participate in the hemp market. We’ve seen Curaleaf begin producing hemp-derived beverages and edibles, and Glass House Brands is considering entering the THCA flower space and potentially using a similar direct-to-consumer model. On the show, we talked about risks and opportunities in this growing category.