Looking at the charts of our portfolio stocks today, there’s been no real change since last week, so I have no changes. But there have been a few relevant news items.
Jushi (JUSHF), which I had recently criticized for being late with its financial reporting, pre-announced its second-quarter results on Monday, and thus became the first of our companies to announce!
Jushi’s revenue was $47.7 million, up 15% from the first quarter and up 220% from the year before. Gross profit was $21.9 million, up 9.2% from the first quarter and the net loss was $11.4 million, a $15.4 million improvement over the first quarter.
Jushi now has 20 stores, four cultivation and production facilities and a diversified medical and consumer brand portfolio. In the second half of 2021, management expects to open an additional seven BEYOND / HELLO retail stores nationally, add two Nature’s Remedy of Massachusetts dispensaries and a grower-processor facility in Massachusetts through an acquisition. So the trend is good. However, management did say that supply chain disruptions have slowed construction at both their Pennsylvania and Virginia grower-processor facilities.
Innovative Industrial Properties (IIP) yesterday announced that it closed on the acquisition of a property in Illinois and entered into a long-term lease with a subsidiary of 4Front Ventures. IIP already owns and leases to subsidiaries of 4Front a cultivation, processing and dispensing facility in Massachusetts and a cultivation and processing facility in Washington, and this brings to 73 the number of properties that IIP owns in the industry nationwide. The stock is up today and still aiming for its February high of 222. And the company is expected to release its second-quarter report after the market close today.
Finally, on the legal front, this week we got a little more visibility into the Cannabis Administration and Opportunity Act, which is still being drafted.
On the plus side, the Act would remove marijuana from the federal Controlled Substances Act—which would eliminate Section 280E, the provision in the IRS tax code that prevents marijuana businesses from deducting the same ordinary business expenses that mainstream industries can.
On the negative side, the Act would set a nationwide marijuana excise tax that would rise from 10% to 25% over five years!
Already, in California, state and local taxes are so high that black market marijuana is far cheaper, and tacking on another 25% would make it very hard for some companies, and almost certainly hurt more than the removal of Section 280E helps.
The bill does include a tax break for companies with less than $20 million in revenue, but all the major public companies are well above that level.
The bill’s sponsors are taking comments on the draft measure until Sept. 1, and a Senate floor vote may come by April 2022. However, passage is by no means certain. Even some Democrats aren’t on board.
