Adam Jackson
When the news that the U.S. Department of Health and Human Services recommended reclassification of cannabis as a schedule 3 drug, several stocks with industry ties popped. The optimism is great, but analysts point out that there are many details that still need to be worked out before any real change will come to Wall Street with regard to cannabis.
In a report issued on Thursday, analyst Pablo Zuanic noted that rescheduling could bring huge tax relief, enable U.S. stock exchanges to list cannabis companies, and allow federally chartered banks to service plant-touching companies.
But there are several key issues that need to be addressed before any of those changes can be implemented. The industry would need a federal regulatory framework and questions of states’ rights and tax collection abound.
“From credit card acceptance to scalability to relaxed taxation, the opportunities from a change to schedule 3 will be enormous, but companies should embrace the discomfort that will come from the disruption,” said FundCanna CEO Adam Stettner. “The industry will need to plan for the chaos that will come from interstate commerce and marketing; most companies will be on their heels.”
The uplisting issue also isn’t a slam dunk, as few cannabis operators are likely to be prepared for such a move. During an X Spaces (formerly Twitter Spaces) discussion, Jason Wild of Terrascend – which recently uplisted to the Toronto Stock Exchange – addressed what the move might change.
The path to the golden goose – a listing on a U.S. stock exchange – requires a lot of internal work, Wild advised. The Nasdaq and New York Stock Exchange have stringent filing requirements and standards that companies must meet, such as reporting financials using Generally Accepted Accounting Principals (GAAP) rather than the International Financial Reporting Standards (IFRS).
TerrAscend, Wild said, is in a position to make that leap because of the work it did for the TSX.
But for now, exuberance for cannabis firms reigns, with double-digit stock price increases across a wide swath of the industry on Wednesday, including:
- MSOS ETF (NYSE: MSOS), up 21%
- StateHouse Holdings (OTC: STHZF), up 74%
- Columbia Care (OTC: CCHWF), up 38%
- Jushi Holdings (OTC: JUSHF), up 32%
- Ayr Wellness (OTC: AYRWF), up 29%
