01 Jul Corona-Cannabis Update #15: Here We Go Again…

In our last entry all the way back on June 14, we noted that “a number of states are again witnessing spikes,” which now seems like quite the understatement. COVID-19 is steamrolling exponentially through a number of states, mostly in the South and West, and especially those that had reopened such as California, Texas and Florida. This while key northeast states like NY, NJ and CT have maintained their low rates after their harsh lockdowns and generally slower reopenings (NYC just announced its delay in moving to Phase III reopening). So we are by no means past this pandemic, but hopefully we are a bit more prepared now as the caseload and hospitalizations rise dramatically. The George Floyd and Black Lives Matter protests have not ended but have continued to remain peaceful overall, and news reports suggest that they did not lead to any spike in COVID-19 cases, as the virus apparently does not transmit well outdoors. Here’s the latest on the impact of the coronavirus on the cannabis and hemp industries:

• New York still waiting for legalization. In a recent interview, the NY Assembly Majority Leader Crystal Peoples-Stokes said that talks remain “active” on cannabis adult use legalization, but when asked when she thought final approval would occur, she said, “I can’t tell you that.” And in a sign of frustration with her fellow Democrat Governor Andrew Cuomo, she said of him, “I think there’s a desire to stay engaged on the topic. But I’m not so sure that there’s a real commitment to move things forward.” She acknowledged that the pandemic has made it more difficult to get legalization passed. Meantime, at the Federal level, White House Acting Chief of Staff Mark Meadows is heard laughing when asked by a reporter about the possibility of federal legalization of cannabis before the US election in November.
• Deals and more deals. In one large deal the structure was amended from cash and stock to all stock. A multi-state operator has sold its PA operations for $37 million. Another MSO has delayed its deadline to complete its sale to a Canadian company when US legalization happens, and has lowered the ultimate price of the deal apparently by as much as two-thirds, while also providing the MSO a small cash infusion and terminating its founder as CEO (he remains Chairman). A cannabis-focused real estate investment trust (REIT) has raised $225 million in a public offering. Another Canadian company says the pandemic has made it “virtually impossible” to make a $35 million debt interest payment. Cannabis stocks have fared well since their March lows, but are still well down for the year.
• TCPA claims on the rise. There has been a big increase in claims that cannabis businesses have violated the Telephone Consumer Protection Act (TCPA) by sending unsolicited texts to people’s cell phones. This increase appears to be COVID related.
• COVID-19 has impacted cultivators. An interesting report says that two-thirds of cultivators have been affected by the virus. They report decreased sales, staff reductions and even suspension of operations. A smaller portion did report increased sales and staff hours, and one-third said the pandemic has not caused issues. With cannabis businesses remaining open as essential during the pandemic, this somewhat negative report was surprising.
• Home delivery on the rise; deadline missed. New Jersey is now allowing home delivery of medical cannabis because of the coronavirus. Dispensaries do need state approval of their plan to deliver. In the meantime, due to COVID-19, Illinois has missed its July 1 deadline to award certain licenses. The Governor there has ordered the pushback, with no new deadline set.

As with most of these entries, some good and some bad. The New York situation is super frustrating, especially with Democrats controlling the Governorship and the legislature. It is good to see some financings but they remain few and far between. As I keep saying to my clients, please just stay inside the legal lines on simple rules like not violating the TCPA. The report about cultivators is indeed interesting and is consistent with some of what I had been hearing. Not all fruit and lollipops for the essential industry. Good job NJ on allowing delivery (though it took too long), and Illinois really needs to get its act together if it wants the jobs and tax revenue from their well-designed legalization plan.

Post-pandemic tip of the week: Telemedicine is here to stay. Get used to it (I zoomed with my doctor to arrange for my COVID antibody test, which was negative). The many barriers to wide adoption and insurance coverage were wiped away in a matter of days when the pandemic really hit. This will be of significant help for medical cannabis, especially following federal legalization when insurance coverage may be available and reimbursement for the remote office visit will be important. In the meantime, post-pandemic hopefully states will make telehealth a critical part of assisting potential cannabis patients with doctor visits and approval for medicine.