WeedWeek edition / March 09, 2020
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Correction: In an email last week announcing the Weedys awards honorees we misspelled Brad Bogus and his company, Confident Cannabis. We regret the errors.

1 CANNABIZ BRACES FOR CORONAVIRUS

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@theblacklistxyz

The global coronavirus panic is the latest crisis set to roil the cannabis industry. 
MJBiz

Thus far the cannabis supply does not appear directly threatened. But companies anticipate disruptions with vape related hardware, the vast majority of which comes from China. WW California has more.
MarketWatch

  • “We’re in the middle of this capital crunch – this Darwin phase... And (coronavirus) is only exacerbating the situation, because it’s just causing uncertainty,” Morgan Paxhia, managing director of cannabis investment firm Poseidon Asset Management said.
  • Matt Karnes, founder of consultancy GreenWave Advisors, said the sectors' public companies, already hammered by their dismal stock performance, are most vulnerable. 
  • At the same time, it may create opportunities for investors as valuations deflate to more reasonable levels, Merida Capital Partners managing partner Mitch Baruchowitz said.
  • As China's hemp industry suffers, the virus also creates an opportunity for U.S. hemp growers.
    Canna Law Blog
  • The virus has led to the cancellation of industry events in Israel and California. Some, such as the NoCo Hemp Expo in Denver, appear to still be on.
    MJBiz
  • If the virus continues to spread, it could cancel 4/20 events.
  • The crisis could also delay New York Gov. Andrew Cuomo's effort to legalize REC.
    Marijuana Moment

Leafly looks at how the epidemic may change cannabis use.

  • The post tells users to stop sharing joints and other inhaled consumption methods. Users may also want to invest in a "bong condom," like the "Mouth Peace" from Moose Labs.
  • If you catch corona virus, MED use may not be a good idea. 

Here's a thought I didn't see anyone else share: A major crisis that forces people to spend more time at home surely has some upside for the cannabis industry.

A note from the editor

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2 STATES WEIGH POTENCY CAPS

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Lawmakers in several states have expressed interest in THC potency caps, a development the industry finds worrisome.
MJBiz

  • The Florida House passed a bill which would limit THC content at 10% in products for MED patients under 21.
    Tampa Bay Times
  • A proposal in Washington state would limit concentrates to 10% THC.
  • There's talk of a potency cap bill in Colorado this year, though insiders say it's unlikely to be filed.
    Westword
  • A proposal in Arizona, subsequently withdrawn, would have limited MED potency to 2% THC.
    Phoenix New Times

Quick Hit

  1. U.S. Treasury Secretary Steven Mnuchin acknowledged the cash only nature of the cannabis business is causing problems for the IRS. He seems to think the onus is on Congress to remedy the situation.
    The Hill

3 DISTRESSED WEED ASSETS: THE NEXT FRONTIER

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In a WEEDWEEK EXCLUSIVE, I interviewed Joe Caltabiano, outgoing co-founder and president of Cresco Labs, the Chicago-based MSO.

  • We discussed the Illinois market, where he sees opportunity and whether it was a mistake for Cresco to go public.
  • Going forward, Caltabiano is excited to search for value in distressed assets:

"Some people, they may have a great license, but have been deploying money towards a part of their company that really doesn't have the long term value. So you have to look at the core assets that you have within the company and sometimes divest or exit some of the other things. Occasionally from time to time people hang on to the wrong parts of their business or get married to the wrong parts of their business.Sometimes it takes an outsider coming in and looking at how to monetize a business in a different way."

He's not the only one thinking this way. Former MedMen CFO James Parker, who sued the company, is looking at distressed assets at his new firm Trava Capital.

  • MJBiz also takes a broader look at the distressed assets opportunity.
This week on the podcast
Tiffani Sharp Lifts POC Women in Cannabis

4 CANOPY LAYS OFF 500 AMID CANADA SLUMP

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In the latest indication of how tough business is up north, Canadian giant Canopy Growth closed two indoor grows in British Columbia and laid off 500 workers.
MarketWatch

In other Canadian woes:

If the Canadian market matters to you, you need to be reading WW Canada.

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5 INDUSTRY, HEAL THYSELF

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WeedWeek readers are familiar with the systemic difficulties associated with running cannabis companies. But a couple of interesting posts this week highlighted some of the industry's unforced errors.

  • Beard Bros Pharms posits a theory: "Massive cannabis brands are crumbling...The reasons for their failures are many, but we contend that at the root of many of these predictable outcomes was some misguided attempt to build the brand to appeal to these supposed saviors of legal weed – the phantom ‘new cannabis consumer’ – while neglecting to provide anything for the longtime connoisseurs to connect to."
  • Max Simon, CEO of video content company Green Flower Media, wrote about five ways to end the toxic work culture at cannabis companies. Across the industry, he writes, "There are serious workplace safety concerns and harassment, unjust firings and layoffs, and a lack of any training or career development."
    Green Entrepreneur

Quick Hit

  1. Michigan brand Narvona became the first cannabis company to win a Global Packaging Award from the PAC Packaging Consortium.
    Forbes

PRE-ORDER "THE CANNABIS DICTIONARY!

6 LITIGATION: IT GETS UGLY

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Canna Law Blog suggests companies aren't prepared for the embarrassing revelations which can accompany litigation:

"What makes the risk of publicity all the more problematic is the potential for rule violations to come to light. Given the fact that all state-level cannabis regulations are murky and complicated, it is understandable that some companies may not have strictly complied with the rules. That may come out in discovery. What also may come out in discovery are the internal conversations about those rule violations. Imagine an email chain where the owners of a company talked about, acknowledged, and agreed to sweep under the rug a severe rule violation. That could be part of the record in litigation."

 

While not all the details emerged from litigation, in October WeedWeek documented Colorado start-up Ebbu's promotion of an investment structure that may have violated state law. Colorado authorities have repeatedly declined to comment. Canopy Growth, which acquired Ebbu's intellectual property, has also declined to comment.  

Meanwhile, huge law firms like Reed Smith, Locke Lord and Dorsey & Whitney are moving to build out their cannabis groups.
Business Insider

7 FIRST MASS. EQUITY SHOP OPENS

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The Boston Globe profiles Pure Oasis, the first pot shop to open in Boston and the first economic empowerment license business in Massachusetts. It's been a long road for co-owners Kobie Evans and Kevin Hart.

Meanwhile in Utah: The state's first MED "pharmacy" opened. MED cards can be obtained from 60 health care professionals in the state.
AP

Quick Hit

  1. Federal prosecutors subpoenaed documents on approximately 30 California companies from dispensary locator app Weedmaps. It's not clear who's under investigation or for what. Weedmaps is cooperating.
    MarketWatch

8 GLIMPSES OF THE FUTURE

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Here are a few intriguing nuggets to get you thinking:

In D.C., the city that blunts the cutting edge, the FDA released a long-awaited report on regulating CBD. It didn't clarify much.
Stat News

9 WHAT STINKS?

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In a precedent setting case for California, an Alameda County (East Bay) court ruled that the marijuana odor emanating from a car wasn't sufficient to justify a vehicle search. WW California has more.
Southern California Public Radio

A Federal judge on the Fourth Circuit Court of Appeals (Richmond, Va.) ruled that the smell of marijuana coming from inside a house, is sufficient evidence "to search the entire house...including any safes and locked boxes" even if officers have already identified the source of the smell.

@BradHeath-- Twitter

 

10 A NEW WEEDWEEK FEATURE!

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Welcome to a new feature: The question of the week. It's pretty straightforward. Each week we'll ask a question and you can respond. We'll post some of the most interesting answers on the web site and in next week's newsletter.

And the inaugural question:

  • What common industry practice do you consider most self-defeating and why?

Send responses to: hello@weedweek.net Please include your name, location and affiliation. We'll honor requests for anonymity.

Quick Hit

  1. Comedian Sarah Silverman hosted a benefit at Los Angeles club Largo for The Initiative, an accelerator for female-owned pot businesses.