It was a fantastic venue, and a very good day. Networking heavy, much discussion on the realities of applying social equity, and some great material around markets from the ‘When Wall Street Comes to Cannabis’ panel in the afternoon.

There’s definitely a cleave down here between the ‘old’ world and the ‘new’. In some ways, it feels like Canada did 3 years ago. Some conversations are identical. But, there is a HUGE distinction: where Canada’s ‘old world’ was defined as the illicit market – here – the ‘old world’ means BIPOC. The drug war was (and remains) merciless here, jailed people disproportionately, most often indiscriminately, and effortlessly…. ruined lives.

Canada didn’t bother acknowledging the Drug War – outside of printing a $60 application form to nullify criminal charges that nobody cares about <NB: how ‘white’ is that?> Here in America – it’s very much a front and centre topic. Steve D’Angelo had a good line in a late day panel where he implored N.Y. and its’ legislators to absorb social equity into the regulations. To paraphrase:

“We got it wrong in California. We got it wrong in Illinois. NY is our last chance, because if NY doesn’t get it right, what chance do you think we’ll have to get it right in Texas?”

Steve D’angelo (para)

There’s a wide gulf here between the old and the new, with some real live real recent examples of MSO’s ‘behaving badly’. I heard about a few of them.

I wanted to get to one of the notable activists (Amber LittleJohn), who was cheered by the crowd early in the morning. She’d mentioned SAFE as being vital for enabling capital for social justice: Blue and I are of the opinion that that’s a load. It’s repeated by MSO’s constantly. I was hoping to ask her about how she saw it useful, but she was engaged constantly throughout the day and night. There appeared to be a separation between the ‘suits’ and the ‘activists’ – real, or perhaps just my perception.

I spoke onstage with Gary Santo, CEO of TILT Holdings ($TILT). He wanted to talk about a recent deal with the Shinnecock Tribe on Long Island. I congratulated him on his new dispensary, and said I wanted to ask him about when he’s going to become a weed company (paraphrased). He laughed. Seems like a nice guy honestly, and direct. The activist crowd wasn’t much present for it, nor did he get many cheers for the deal – which I think was a bit of a shame.

Ohio was apparently a debacle in this regard, but there’s similar stories from other states. Legacy stores and operators wanting to expand into recreational are starved for capital. Enter an ambitious MSO who starts a JV, finances it, waits until the horse gasses out (set by tenor of the loan, innate finance cost), who then assumes the license either through purchase option (signed initially) or via default.

$TILT’s deal with the Shinnecock finances a dispensary, grow op, processing and packaging – which ultimately goes into a 75/25 revenue share after that point. Repayment to the JV is made out of cashflow. As Santo said: “they (Shinnecock) own it now, they’ll own it when it’s opened, and they’ll own it always”.

<It doesn’t explain why there’s a look back in 9 years to option the agreement again…..but he said the words unequivocally. I didn’t hear a negative word about any aspect of it>.

Subscribers will be familiar with our research and take on them. Santo’s going to be crawling over broken glass for the next couple of years over their equity bonfire. He alluded to prior ‘mistakes’ onstage, and I was impressed.

I also spoke with Jen Drake – COO of AYR Wellness. I wanted to touch on the challenges of integration – and the acquisition tear they’ve been on. I also wanted to see how their latest tack in positioning – ‘quality’ – could be maintained across multiple cultivation platforms and processing facilities and hold scale.

A highlight was meeting Pablo Zuanic from Cantor. I really like his thinking, and bookended him during a break. I asked about pulling DCF from his models and price targets (he took shots from the #MSOGang for that), and I suggested that probably could have been done a couple of months earlier. His response? I’ll paraphrase the best I can: “There are capital firms out there with a ‘buy’ on every single MSO out there. That’s ridiculous. Sector perhaps, but not every single company. The recent volatility of MSOs – when DCF is included – was leading to moments where a stock could be ‘underweight’ but a ‘buy’ – or ‘overweight’ but a ‘sell’ ……when asset valuation was compared to market. He thought that was dumb

He also said it was becoming hard to explain to MSO CEO’s when they called and asked about ratings. So, he jacked DCF.

Made my day, and our subscribers from the financial sector will get it.

The Wall Street panel was left untended at times – but it was able to cover miles. I’m really happy to hear it might be up on YouTube. I highly recommend you keep an eye out for it, and follow Prohibition Partners. My experience with them and (BoC) has been positive, and that they are willing to drive hard content. This panel had horsepower (Carleton is always good for a couple of good one liners), even if it did meander.

Consensus about Constellation is that they’re fucked. That Tiering in an inevitability (it is here). And that interstate is a given. Opinion on SAFE falls into two camps: ‘fer or ‘agin’ – with motivations mixed as to both.

At the State level, these poor buggers are stuck in the place where Canada was: waiting for regulations. Meteor strikes await. Federally, it’s worse, because the starting line hasn’t even been sprayed onto the track.

I asked Richard Carleton what he thought about the CAOA and it’s prospects. I’ll paraphrase him here – because I’ve not only spent time with him in the past and asked, but I also know that he’s a guy who says what he thinks, and stands on it. A great character trait in my eyes.

He said: “They (Democrats) don’t have the votes in the Senate, and Biden isn’t going to spend the money it’ll take to bend enough arms”. He strongly doubts it’ll happen. Another person I spoke with summed the CAOA’s prospects similarly: “The Democrats can’t get out of their own way.”

My takeaway from the day is that the broader legislation is being taken as un-passable: stuck between a SAFE ‘rock’ and a Social Justice ‘hard place’….. defining the frontlines of the battle. I don’t believe it’s quite that – but people don’t cotton to nuance by nature.

More to come.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in any of the companies mentioned.