G By Thomas Carroll
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iven the current coronavirus panic, global markets have sold off significantly. Daily trading is extremely volatile... The S&P 500 Index might be down 8% one day, only to rise 7% the next day. We’ve witnessed this cycle a few times over the last four weeks. You may have seen legendary hedge-fund manager Bill Ackman on CNBC recently. He called on the president to immediately shut down the borders and send all Americans on an extended spring break. Then, famous investor Ray Dalio believes this crisis could cost the U.S. more than $4 trillion. He added that we have never seen something like this in our lifetimes. He is right... Given the publicly vocalized fear of these very wealthy professional investors, I wonder if a bottom is near. Feeling equally pressured are the already beaten-up cannabis stocks... Year to date, the North American Marijuana Index is down about 50%, while the S&P 500 has declined by about 23%. However, cannabis stocks have been growing revenues and pushing toward profitability. But a number of new market challenges have dampened investor enthusiasm, such as continued bottlenecks in the Canadian distribution system, lack of federal cannabis policy in the U.S., and no FDA guidance about CBD uses.
And now, the world is essentially shut down... The global COVID-19 outbreak is bringing consumer spending to its knees. How will consumers get their cannabis?! Fear not... A nuance in how cannabis found its way to legality is allowing most dispensaries to stay open. Its legal status is grounded in medical use. As such, dispensaries offering products to cannabis patients have been deemed “essential” by regulatory bodies in both Canada and the U.S. This is the same status enjoyed by pharmacies and grocery stores. So we set out to see what this means for the cannabis industry. In the midst of these volatile market conditions – before the quarantines – we reached out to a number of cannabis companies – both private and publicly traded. We wanted to get their thoughts on the pandemic and see if they expected to be “knighted with essential” status. Would they be allowed to remain open, or shutter alongside restaurants and bars? All of those early conversations confirmed our beliefs. E-mails, texts, and calls with these companies lead us to three initial conclusions... First, within medical cannabis programs (as opposed to recreational), dispensaries are deemed critical medical service providers.
American Consequences
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