You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
This week, more bad news came out: Cannabis REIT IIPR’s resolution to the problem it announced in December failed to work. So much is going wrong for the cannabis industry these days, and the failure of PharmaCann to pay its rent is just more evidence of the challenges the American cannabis industry faces.
When the initial news broke, we ran the IIPR press release. I actually added a large position to my model portfolio at 420 Investor, which I exited profitably after it reported its Q4, which was after the problem “resolution” too. Before then, though, our newsletter warned investors that the IIPR collapse had negative implications for the other REITs, which proved to be the case. Here is how the cannabis REITs gave performed year-to-date so far:
IIPR, which I just repurchased in the 420 Investor model portfolio, is down less than two of the other REITs, and it is down a lot less than the 22.2% decline in the Global Cannabis Stock Index. If you look at the performance since the elections in November, IIPR is down 51.7%. The Global Cannabis Stock Index has dropped 38.1% since then, while the other REITs have had price returns of -35.0% to +1.5%. In my view, these REITs remain dangerous, as their tenants face financial pressure ahead.
Last year and in 2022, I was quite concerned about cannabis stocks, but I became very hopeful that rescheduling would take place, eliminating 280E taxation. While this still may happen, it is quite difficult to have confidence that the DEA will reschedule cannabis and that Congress won’t create a new law to keep the egregious taxation.
Investing in any American cannabis company, sadly, is a big gamble right now. While I hope that the industry is able to advance, I am focused currently on finding companies that can weather this storm better than peers or that can pursue other cannabis opportunities. Investors should pay close attention to the balance sheets and cash flows, and also find companies that can benefit from federally legal cannabis (in other countries).
Sincerely,
Alan
