The North American cannabis industry is on the cusp of scoring its biggest victory since Canada went legal in October of 2018… and it’s all due to the coronavirus.
Marijuana Moment reported that the new economic stimulus bill called CARES 2.0 includes the cannabis-friendly SAFE Act, a bill that would protect banks providing services to the cannabis industry from federal prosecution.
Here are some more details directly from the report.
House leadership unveiled a coronavirus relief bill on Tuesday that includes provisions to protect banks that service marijuana businesses from being penalized by federal regulators.
Advocates, stakeholders and lawmakers have been pushing for some form of cannabis reform to be inserted into COVID-19 legislation. And this round, they were successful, with the language of the Secure and Fair Enforcement (SAFE) Banking Act making the cut.
Rep. Ed Perlmutter (D-CO), chief sponsor of the standalone bill that is being included in the new broad package, previously raised the issue in a Democratic Caucus meeting and said Speaker Nancy Pelosi (D-CA) supported it.
A summary of the legislation says the banking section would “allow cannabis-related legitimate businesses, that in many states have remained open during the COVID-19 pandemic as essential services, along with their service providers, to access banking services and products, as well as insurance.”
I see a high probability that CARES 2.0 will pass in the next few weeks with the SAFE Act tacked on.
If it happens, I expect it to give cannabis stocks a big boost because it would fix one of the industry’s biggest problems.
Under current federal law, banks aren’t allowed to offer financial services to the cannabis industry.
Being deprived of basic financial services, like being able to open a business bank account and accept credit cards, has caused all kinds of problems for the U.S. cannabis industry.
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Here are some more details from Crain’s Chicago Business.
Without access to banking, marijuana businesses such as dispensaries have been forced to handle only cash for their transactions, dealing on average $3 million of yearly revenue in cash. Dispensaries in other states have been targets for armed robberies and theft, and others find themselves burdened with fees for cash storage, armored vehicles and insurance. Shut out from using credit, these companies routinely pay high penalties for everyday transactions.
Giving the largest cannabis companies in the U.S. access to basic banking services would create huge benefits, like:
- Drive revenue growth
- Margin expansion
- Better access to capital markets
- Tax benefits
If the SAFE Act passes, I expect it to be great for the entire cannabis sector. But I see two early industry leaders that I expect to benefit the most.
This looks like a great time to give both of these stocks a second look because both are trading at a discount.
Two Cannabis Leaders Looking to Cash in on SAFE Act
Cannabis stocks fell sharply in March when COVID hit the broader stock market. Although cannabis stocks have rebounded in the last few weeks, many industry leaders are trading far below their 52-week high. That discount would have been almost unimaginable last year.
Cresco Labs (CRLBF)
Cresco is one of the largest cannabis companies in the U.S. with a market value of $800 million. This company is a direct play on the high-growth U.S. cannabis industry. It operates in nine states, owns 15 cultivations facilities, 15 dispensaries, and holds 25 retail licenses. Despite the impressive resume, Cresco is down 70% from the 52-week high.
Curaleaf Holdings (CURLF)
Curaleaf is another early industry leader. The company operates in 17 states, owns 53 dispensaries and 15 cultivation sites. Similar to Cresco, Curaleaf is a direct play on the high-growth U.S. cannabis industry. Despite a recent rebound, shares are still trading 50% below the 52-week high.
The Big Picture
The North American cannabis industry is on the verge of a massive breakthrough. If the SAFE Act does make its way into CARES 2.0, it would be a big win for the entire U.S. cannabis industry – but I think would show up most for Cresco and Curaleaf.
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.
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