18 Mar Corona-Cannabis Update #1: Sales Up, Legislation Iffy

I hope you are all staying safe and social distancing amid all this craziness. Here is today’s quick update on information about our industry and its response to the coronavirus crisis.

• Canadian sales are up. Call it hoarding. Call it search for calm. Or escape. Or medicine. But many reports are indicating a surge in Canadian cannabis sales. MJBiz reports “unprecedented” sales in retail outlets. Operators reported no break in their supply chain and believe they can handle the surge in sales for now. Stores are focusing on extra cleaning and social distancing.
• US sales are up as well. Same reasons one would think. USA Today tells us that sales in Washington State, for example, are up by a full one-third and in California some reports of sales surging as much as 50%. But here some are indicating that fear may be a bigger driver as access to supply is a bit more vulnerable given that no state can import product from another state.
• Legalization efforts at risk. New York just released new draft language of its proposed adult use bill. Legislators remain hopeful to include compromise language in their annual budget, which must pass by March 31 (they are trying to speed that process and finish this week, we shall see). But some are concerned that the surge in coronavirus cases in the Empire State will move cannabis legalization to the rear burner for another year. And for states trying to get legalization on the ballot, challenges going door to door to get signatures could cause delay in those efforts as well.
• Some financings moving forward. New Cannabis Ventures on Monday published the press release from a publicly held California-based cannabis producer announcing completion of a new $2.3 million loan. At the same time the company announced a non-binding term sheet for a larger $14.5 million equity financing led by several cannabis-focused funds.
• Stock prices more attractive. Analysts, investor blogs and such are starting to suggest that some cannabis stocks, hit hard by sell-offs last year and now the market crash of 2020, could be attractive buying opportunities. This is a big change from the heady days of gargantuan market values of these companies through 2018 and early 2019.

And now my thoughts. I think we can expect medical cannabis retailers to be among the last to close, if they do at all. Expect demand to stay strong, especially with pick-up and delivery as opposed to in-person shopping. I am not terribly optimistic about state legalization efforts this year when we are all appropriately focused on avoiding the virus and ensuring that the economy does not suffer any more overwhelmingly than already appears to be the case. I am equally unoptimistic about any noticeable surge in financing activity in the coming months. I sincerely hope I am mistaken of course. We are working on a number of interesting and creative plans with clients given these likely realities. Who remembers life after 9/11? During the 2008-10 financial crisis? Buckle up (or light up if that’s your preference) and we will get through as we always do. I’ll be back regularly with these updates. Stay safe everyone!