The U.S. cannabis industry is growing at an unparalleled pace. Cannabis sales for 2021 are estimated to finish at $31 billion, an increase of 41% over 2020. And yet, despite this positive sales growth, the outlook for…
investing in cannabis is mixed.
Cannabis stocks slumped in the second half of 2021 after diminished prospects of near-term U.S. federal regulatory reform extended barriers to broad ownership of cannabis equities by institutional investment managers. At the same time, mergers and acquisition (M&A) activity in private markets reached record levels as the industry grappled with increased competition and other byproducts of its latest expansion cycle.
While near-term federal regulatory reform remains in question, three trends are set to play a critical role for those investing in cannabis in 2022.
Financial Optionality Improves
The Secure and Fair Enforcement (SAFE) Banking Act will not pass in 2021 after it was removed from the National Defense Authorization Act (NDAA). Nevertheless, SAFE’s initial involvement in the NDAA shows there is bipartisan support to pass federal banking reform.
While politicians’ future actions on SAFE are unpredictable, it would seem the November 2022 midterms represent a line in the sand for political leadership to definitively take or not take action on the bill.
While SAFE plays out, companies will continue to rely on alternative financing to fund expansion. Lenders are becoming increasingly comfortable with cannabis businesses’ financial sustainability and are accordingly offering better terms. In May…
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