After the announcement of cannabis moving to Schedule III, cannabis stocks got a nice little bump. But as a whole, this is just a small moment in a larger push that’s been going on for the last twelve months. As reported by Forbes, the AdvisorShares Pure US Cannabis ETF is up 104% from where it was last year at this time. Compare that to the S&P 500, which is only up 28%.
There are a couple companies who specifically are benefiting from the schedule change. These include Trulieve (TCNNF) and Curaleaf (CURLF). Trulieve is profitable and now with the ability to get some business tax relief through 280e, their numbers will certainly jump in the near future once the scheduling change makes its way through all of the hurdles. Curaleaf, on the other hand, will be in 16 countries by 2027 and keeps growing.
But the problem, according to Forbes, is that there really aren’t many cannabis companies who are making enough money to be investable. The only companies reaching over $100 million in revenue are Trulieve, GTI, Curaleaf, Verano, Cresco, Ascend, and Vireo. There just isn’t a robust market that is taking advantage of the ETF’s out there. And while an announcement was made that all cannabis would be moved to Schedule III, nothing is set in stone and the timeline is completely murky.
As a summation of the questionable future and likely consolidation of the market, Forbes writer Javier Hasse put it succinctly:
“Cannabis has spent a decade chasing scale. The data now shows how narrow institutional scale actually is: seven companies. The industry’s reported profitability rests on an accounting convention that has been a poor proxy for cash in this sector, layered on a tax burden that may or may not lift. Schedule III could change the math. It will not change the count. The companies that clear the bar are the most likely consolidators of the ones that don’t. The question is how long the runway lasts for everyone else.”
Read the sources at Motley Fool and Forbes.
