You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The...

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Friends,

Cannabis investors have been plowing into a very beaten-up part of the market, the American cannabis operators, after the HHS revealed that it has requested that the DEA reschedule cannabis from Schedule 1 to Schedule 3. As we discussed last week, this is great news if it plays out, as it would end the very negative taxation of the industry, 280E. We warned last week that it might take a while and that the DEA might decide to go to Schedule 2, which would leave 280E intact. The market extended its rally this past week, and many companies have moved rather dramatically, which we think elevates the risk if things do not play out as expected.

Since August 29th, the day before the news hit, the largest MSOs have soared:

So, on average, these five stocks have rallied 24.5% on this news. Looking at the year-to-date returns, a few are up a lot now, but one, Trulieve is still down:

A few weeks ago, we suggested that investors look at price-to-tangible-book as a metric.  While the change in sentiment makes this less timely, we believe that it can help investors assess the downside risk if things don’t play out as expected. Among the largest 5 MSOs, GTI has the best balance sheet but trades at 4.8X tangible book value. The worst balance sheet by far is Curaleaf. Here are the current market caps, net debt, current ratios and tangible book values for the largest MSOs:

Please note that the tangible book value is based upon the tangible book value at 6/30, but it is also updated for the potential exercise of any in-the-money dilutive securities. The net debt is also adjusted for these potential inflows of cash, as is the market cap.

As we discussed last week, we believe that the other parts of the market that have not rallied so dramatically could offer investors good potential returns with less risk than the American cannabis operators. Specifically, I have boosted my exposure in the 420 Investor Beat the Global Cannabis Stock Index model portfolio to Canadian LPs and to ancillary companies. Perhaps things will work out as expected, but cannabis investors should realize that this is not always the case for this sector. Even if cannabis is rescheduled, ending 280E, and even if SAFE Banking passes, some of the MSOs will likely need to raise capital. While the outlook may become better for the MSOs, the danger is great if 280E doesn’t end.


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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:

Exclusives

Illinois Cannabis Sales Stall in August


To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan & Joel

Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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MJShareholders.com is the largest dedicated financial network and leading corporate communications firm serving the legal cannabis industry. Our network aims to connect public marijuana companies with these focused cannabis audiences across the US and Canada that are critical for growth: Short and long term cannabis investors Active funding sources Mainstream media Business leaders Cannabis consumers

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