Article Says It All- SAFE Not An End AllKlein and team are fully aware of where all the legal wrangling is and always have been, as they continue to add assets to their already substantial stable of 'thoroughbreds', they are and will be ready as the legislation proceeds into effect. They are going to need a healthy legal bud system in place as the cartels are shut down and minimized going forward. JMHO...Opt
10:31 AM EST, 12/20/2022 (MT Newswires) -- Wedbush noted that on Monday afternoon it was reported that SAFE Banking will not be included in the omnibus spending bill (according to a Senate staffer familiar with negotiations), marking the second "major blow" for cannabis banking reform, following its exclusion from the National Defense Authorization Act (NDAA) earlier this month. Wedbush said while "not overly surprising", given Mitch McConnell's previous opposition to including SAFE Banking in the NDAA as well as similar commentary regarding omnibus appropriations, this likely puts an end to speculation that Congress will be able to pass any meaningful cannabis banking reform during the lame duck session. "Yes," Wedbush said, "SAFE Banking could still be introduced as a standalone bill, but with only days remaining in the current session, and with a failure from lawmakers to get anything done up to this point, we view that as highly improbable. Looking out to 2023, speculation on regulatory reform will likely ebb and flow as it always has historically, though actual enactment will clearly be more difficult with Republicans taking control of the House."
According to Wedbush, it is important to note that while this development is clearly a disappointment for an industry "starved" for regulatory reform, nothing really changes for the market-leading MSOs from a fundamental perspective. It said while SAFE would've provided momentum and positive sentiment around more comprehensive cannabis reform down the road, in its slimmed down form (not including SAFE Plus which was "always more of a longshot to begin with"), enactment of SAFE would not have guaranteed MSOs an uplisting to a major exchange. And, Wedbush added, even if SAFE resulted in more competitive lending from regional banks, with interest rates on the rise, market leading MSOs would have never been able to add or refinance their debt at a lower cost of capital that the high single-digit rates they currently carry.
Where, Wedbush asked, do we go from here? Over the coming days, it said there may be renewed speculation that lawmakers are working on a standalone bill, or that the House may include SAFE as an amendment to the omnibus spending package, but again, given where we are in the session, actual enactment would seem highly unlikely. From a company specific perspective, Wedbush added, the market leading MSOs, including the four under its coverage (GTI, CURA, TRUL and CL) will continue to focus on what is actually in their control, which includes driving topline growth, while protecting profitability and cash.
Wedbush said: "We continue to believe that better days lie ahead for the cannabis industry and that MSOs should benefit from an expanding TAM from new adult use states coming online and for the supply, demand imbalance to correct over time as capex spend comes down across the board. At current trading levels, the broad selloff looks overdone as shares for the MSOS index, as well as the four market leading companies under our coverage are all trading 8-20% below the levels seen on October 5th, the day before President Biden made his pardon announcement."