Cannabis News
Your Million-Dollar Cannabis Business May Soon Be Worthless, And That Is Just the Beginning of the Bad News
Published
3 months agoon
By
admin
A great, and devasting article, by legendary journalist Deb Borchardt at Green Market Report, points out that cannabis retail locations in California are seeing a massive drop in valuations. If the weed revolution is the way to make riches, how are retail locations in the California going down in a value? As California goes, being an early pioneer is weed and having a population of almost the size of Canada, will other states soon see the same discount prices on cannabis businesses?
The worst news may not even be baked, no pun intended, into the equation yet, either! If full legalization is enacted, how would interstate commerence and the fact cannabis is no longer an illegal substance effect current models with high overhead and startup costs?
Could million-dollar cannabis dispensaries soon be worthless? Well, according to Green Life Business CEO Drew Mathews, the answer is yes. Mathews believes that the shift in the California market from valuing dispensaries based on top-line revenue to EBITDA (earnings before interest, taxes, depreciation, and amortization) and net income could lead to a significant decrease in dispensary valuations.
The Rise of the Cannabis Industry
The cannabis industry has grown exponentially since its legalization, with sales projected to reach $40 billion by 2025. Dispensaries, once small, niche businesses, have transformed into multimillion-dollar enterprises. However, this rapid growth has also led to increased competition, regulation, and scrutiny.
Changing Valuation Metrics
Historically, dispensaries were valued based on gross sales, often leading to inflated prices. As the market matures, investors are now prioritizing profitability. This shift means that dispensaries with high revenues but low net income may see their valuations plummet. For instance, dispensaries in California have experienced valuation drops of up to 75%, with some businesses that once sold for $2 million now listed at $500,000.
This has created a scenario where dispensaries that generate significant sales but operate at a loss are becoming increasingly undesirable in the marketplace.
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Dispensaries are now being valued based on profitability rather than gross sales
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Buyers are prioritizing a dispensary’s ability to generate profit over its revenue
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Dispensaries with high sales but low profits are becoming less attractive to buyers
Implications for Dispensaries
1.Oversaturation of the Market:
The rapid growth of dispensaries has led to an oversaturated market, creating fierce competition that threatens profitability. Many entrepreneurs have entered the industry, drawn by the promise of lucrative returns, often without a clear understanding of market dynamics. As competition intensifies, dispensaries are compelled to differentiate themselves, frequently resorting to price wars and deep discounts to attract customers, which drives overall prices down and impacts their margins.To succeed in this challenging environment, dispensaries must adapt their strategies by focusing on unique value propositions, diversifying product offerings, and enhancing customer service. Effective cost management and operational optimization are essential for maintaining profitability amidst this fierce competition. Ultimately, while the oversaturation of the cannabis market presents significant challenges, it also offers opportunities for those willing to innovate and adapt.
2. High Taxation and Regulatory Costs:
Dispensaries in the cannabis industry face substantial taxation and regulatory fees that significantly impact their profitability and sustainability. Many states impose high excise taxes on cannabis sales, ranging from 10% to 37%. For example, California has a 15% excise tax, while Washington can reach 37% at the retail level. Local taxes can further compound this burden.
Additionally, dispensaries must navigate various regulatory fees, such as Canada’s 2.3% fee on cannabis companies, alongside the constraints of IRS Section 280E, which prevents cannabis businesses from deducting ordinary expenses. This combination of high taxes and regulatory costs can make operations unsustainable, with less than 25% of cannabis businesses achieving profitability. Ultimately, these financial pressures can drive consumers back to the black market, undermining the objectives of legalization.
3. Limited Access to Financing
Limited access to financing poses a significant challenge for cannabis dispensaries, hindering their growth and operational stability. Traditional financial institutions, including banks and credit unions, often remain reluctant to lend to cannabis businesses due to the federal illegality of marijuana in the United States. This reluctance restricts dispensaries’ ability to secure loans, lines of credit, and other essential funding sources, forcing many to rely on personal savings or high-interest private loans, which can exacerbate financial strain. Without adequate funding, dispensaries may struggle to invest in critical areas such as inventory, marketing, and technology, limiting their ability to compete effectively in a rapidly evolving market. This lack of investment can stifle growth and innovation, making it difficult for businesses to adapt to changing consumer preferences and regulatory requirements. As a result, many dispensaries face operational instability, which can lead to cash flow issues and, ultimately, jeopardize their long-term viability in the industry. The challenges surrounding access to financing not only impact individual businesses but also hinder the overall growth of the cannabis sector, preventing it from reaching its full potential.
4.Changing Consumer Preferences:
As the cannabis market matures, consumer demand is evolving, with a shift towards innovative products like edibles, beverages, and concentrates. Generational differences also influence preferences, with younger consumers favoring products that align with their lifestyle choices. Dispensaries must adapt their offerings to meet these changing needs, or risk losing market share to competitors.
The rise of health-conscious consumers has led to increased demand for organic and sustainably sourced products. Dispensaries that prioritize transparency and quality will be better positioned to succeed in the competitive cannabis market. Staying attuned to evolving consumer preferences is crucial for dispensaries to maintain profitability and long-term success.
The worst of the doom and gloom may still be coming as well. If cannabis is moved to a schedule 3 drug or legalized outright, there will be reguations in place for interstate commerece at some point. When consumers have access to an efficient market, say buying buying products online, pricing shopping, and having them shipped to their door, it tends to lower margins and decrease prices for the whole industry. That is not yet baked into the equation as millions of dollars are being poured into states like Florida and Michigan.
If marijuana is legalized by a new Trump or Harris administration it may not even need a license to grow or sell. A completely legal product would mean that at worst you would need a state-license inorder to sell and ship cannabis across a state line or in the mail. UPS and the USPS would not have any reason to stop shipments of completely legal products. That means any website or app with traffic could become an online dispensary or store. Would Shopify protest if weed is 100% legal? Would they have any legal grounds to stop large retailers already on their platform from adding a “Cannabis/Wellness” section of products?
While Deb’s article points out that buyers come in at a bottom and some people will think this is a bottom in valuations, there are many reasons and unknowns out there that could be aruged that we are not even close to a bottom in the cannabis industry on prices or margins.
Opportunities Amidst Challenges
Despite these challenges, the evolving market landscape presents several opportunities:
Decreased valuations can attract new investors looking to enter the market at lower prices. As million-dollar dispensaries become less valuable, savvy investors can acquire businesses more affordably, injecting capital that fuels growth and innovation.
A focus on profitability encourages dispensaries to adopt sustainable business practices. By optimizing operations and reducing costs, they can build more stable companies that are better equipped to handle market fluctuations, ultimately leading to long-term success.
The need for efficiency may drive innovation, prompting dispensaries to explore new business models, such as subscription services or loyalty programs. Additionally, stronger dispensaries may acquire weaker competitors, resulting in a more robust industry with fewer but more profitable businesses.
As dispensaries demonstrate consistent profitability, they may attract institutional investors and venture capitalists, further fueling growth and innovation. In summary, while challenges exist, the shift towards profitability in the cannabis industry offers significant opportunities for those willing to adapt and innovate.
Conclusion
The cannabis industry’s shift towards valuing dispensaries based on profitability rather than sales marks a critical juncture. While this change may render many million-dollar dispensaries worthless, it also opens the door for sustainable growth, innovation, and new market entrants. Dispensaries must adapt to these evolving dynamics to thrive in the increasingly competitive landscape.
READ THE GMR REPORT AND DEB’S ARTICLE, CLICK BELOW…
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Latest Trump Weed Rumor – Trump Will Federally Deschedule and Decriminalize Cannabis, but Not Legalize It
Published
7 hours agoon
November 14, 2024By
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In a recent interview, former New Jersey Governor Chris Christie made headlines by asserting that President-elect Donald Trump will pursue significant reforms in federal policies regarding marijuana and cryptocurrency. As the nation grapples with evolving attitudes toward cannabis and the burgeoning digital currency market, Christie’s predictions have ignited discussions about the potential implications of such changes on both industries. This article delves into Christie’s insights, the current state of marijuana and cryptocurrency regulations, and the broader implications of these anticipated reforms.
The Current Landscape of Marijuana Legislation
Federal vs. State Laws
Marijuana remains classified as a Schedule I substance under the Controlled Substances Act (CSA), which places it in the same category as heroin and LSD. This classification has created a complex legal landscape where states have moved to legalize cannabis for medical and recreational use, while federal law continues to impose strict prohibitions. As of now, over 30 states have legalized marijuana in some form, leading to a burgeoning industry that generates billions in revenue.
Challenges Faced by the Cannabis Industry
Despite its legality in many states, the cannabis industry faces significant hurdles due to federal restrictions. These challenges include:
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Banking Access: Many banks are hesitant to work with cannabis businesses due to fear of federal repercussions, forcing these businesses to operate largely in cash.
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Taxation Issues: The IRS enforces Section 280E of the tax code, which prohibits businesses engaged in illegal activities from deducting normal business expenses, leading to disproportionately high tax burdens for cannabis companies.
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Interstate Commerce: The lack of federal legalization prevents cannabis businesses from operating across state lines, limiting their growth potential.
Chris Christie’s Perspective on Marijuana Reform
Christie, a former presidential candidate known for his tough stance on drugs during his tenure as governor, has evolved his views on marijuana over the years. In his recent statements, he emphasized that Trump is likely to pursue descheduling cannabis, which would remove it from the Schedule I classification. This move would not only provide clarity for businesses operating in legal markets but also open avenues for banking and investment.
Christie highlighted that descheduling would allow for a more regulated market where safety standards could be established, thus protecting consumers. He believes that this approach aligns with a growing consensus among Americans who support legalization and recognize the potential benefits of cannabis use for both medical and recreational purposes.
The Future of Cryptocurrency Regulation = The Rise of Cryptocurrencies
Cryptocurrencies have surged in popularity over the past decade, with Bitcoin leading the charge as the first decentralized digital currency. The market has expanded to include thousands of alternative coins (altcoins), each with unique features and use cases. As cryptocurrencies gain traction among investors and consumers alike, regulatory scrutiny has intensified.
Current Regulatory Challenges
The cryptocurrency market faces several regulatory challenges that hinder its growth and adoption:
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Lack of Clarity: Regulatory frameworks vary significantly across states and countries, creating confusion for investors and businesses.
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Fraud and Scams: The rapid growth of cryptocurrencies has led to an increase in fraudulent schemes targeting unsuspecting investors.
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Consumer Protection: Without clear regulations, consumers are often left vulnerable to risks associated with volatile markets.
Christie’s Vision for Crypto Regulation
Christie believes that under Trump’s leadership, there will be an effort to find a “sweet spot” for cryptocurrency regulation balancing innovation with consumer protection. He argues that overly stringent regulations could stifle growth in this emerging sector while too little oversight could expose consumers to significant risks.
In his view, a balanced regulatory framework would include:
1. Clear Definitions: Establishing clear definitions for different types of cryptocurrencies and tokens to differentiate between securities and utility tokens.
2. Consumer Protections: Implementing measures to protect investors from fraud while promoting transparency within the market.
3. Encouraging Innovation: Creating an environment conducive to innovation by allowing startups to thrive without excessive regulatory burdens.
Christie’s insights reflect a growing recognition among policymakers that cryptocurrencies are here to stay and that appropriate regulations are necessary to foster growth while safeguarding consumers.
Implications of Proposed Reforms
Economic Impact
The potential reforms proposed by Christie could have far-reaching economic implications:
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Job Creation: Legalizing marijuana at the federal level could lead to significant job creation within the cannabis industry—from cultivation and production to retail sales.
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Investment Opportunities: Descheduling cannabis would open up investment opportunities for institutional investors who have been hesitant due to federal restrictions.
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Boosting Local Economies: Legal cannabis markets have proven beneficial for local economies through increased tax revenues and job creation.
Similarly, clear regulations around cryptocurrencies could stimulate investment in blockchain technology and related industries, fostering innovation and economic growth.
Social Justice Considerations
Both marijuana legalization and sensible cryptocurrency regulations have social justice implications:
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Addressing Past Injustices: Legalizing marijuana could help rectify past injustices related to drug enforcement policies that disproportionately affected marginalized communities.
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Financial Inclusion: Cryptocurrencies offer opportunities for financial inclusion for those underserved by traditional banking systems, particularly in low-income communities.
Political Landscape
The political landscape surrounding these issues is complex. While there is bipartisan support for marijuana reform among certain lawmakers, challenges remain in overcoming entrenched opposition. Similarly, cryptocurrency regulation has garnered attention from both sides of the aisle but requires collaboration to establish effective frameworks.
Conclusion
Chris Christie’s predictions about President-elect Donald Trump’s approach to federal marijuana descheduling and cryptocurrency regulation suggest a potential shift in U.S. policy that could significantly reshape both industries. As public opinion evolves on these issues, lawmakers have an opportunity to enact meaningful reforms that promote economic growth while ensuring consumer protection. The anticipated changes could foster a more robust cannabis industry that contributes positively to the economy and addresses social justice concerns, while clear regulatory frameworks for cryptocurrencies could encourage innovation and protect consumers in the digital economy. Stakeholders in both sectors are closely watching these developments, eager to see how potential reforms might impact their futures. While the realization of Christie’s predictions remains uncertain, it’s clear that the conversation around marijuana and cryptocurrency regulation is ongoing and far from settled.
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Cannabis News
Webinar Replay: Post-Election Cannabis Wrap – Smoke ’em if You’ve Got ’em
Published
1 day agoon
November 13, 2024By
admin
On Thursday, November 7th, Vince Sliwoski, Aaron Pelley and Fred Rocafort held a post election discussion “Post-Election Cannabis Wrap – Smoke ’em if You’ve Got ’em”. Watch the replay!
Key Takeaways from the “Smoke ’em if You’ve Got ’em – 2024 Post Election Cannabis Wrap” Webinar:
- Panelists:
- Vince Sliwoski: Oregon Business lawyer specializing in cannabis and commercial real estate.
- Aaron Pelley: Experienced in cannabis law since Washington’s legalization in 2012.
- Fred Rocafort: Trademark attorney working closely with the cannabis team.
- Election Results Overview:
- Most 2024 cannabis ballot measures did not pass.
- Florida, South Dakota, and North Dakota saw failures.
- Nebraska became the 39th state to legalize cannabis for medical use when it passed two cannabis initiatives, Initiatives 437 and 438.
- Federal and State-Level Developments:
- Medical use is currently legal in 38 states, and 24 states allow recreational use.
- Republican support for marijuana legalization is growing.
- Federal Policy Implications:
- Schedule III Rescheduling: The process to move cannabis to Schedule III is ongoing, which could significantly impact the industry.
- Importance of Federal Appointments: The future of cannabis policy depends heavily on who is appointed to key positions in the administration.
- International and Domestic Trade:
- Schedule III status could ease import/export restrictions on cannabis.
- Unified control of House, Senate, and presidency might expedite legislative progress.
- Economic and Industry Impact:
- Cannabis stocks experienced volatility post-election, reflecting investor uncertainty.
- Federal legalization and banking reforms are crucial for industry stability and growth.
- Future Outlook:
- The potential for federal rescheduling remains strong, with hearings scheduled for early 2025.
- State-level initiatives and regulatory developments will continue to shape the industry.
“How Long Does One Puff of Weed Stay in Your System?”… This topic can be difficult to answer since it is dependent on elements such as the size of the hit and what constitutes a “one hit.” If you take a large bong pull then cough, it might linger in your system for 5-7 days. A moderate dose from a joint can last 3-5 days, whereas a few hits from a vaporizer may last 1-3 days.
The length of time that marijuana stays in the body varies based on a number of factors, including metabolism, THC levels, frequency of use, and hydration.
Delta-9-tetrahydrocannabinol, or THC, is the primary psychoactive component of cannabis. THC and its metabolites, which remain in your body long after the effects have subsided, are detected by drug tests.
Since these metabolites are fat-soluble, they cling to bodily fat molecules. They could thus take a while to fully pass through your system, particularly if your body fat percentage is higher.
THC is absorbed by tissues and organs (including the brain, heart, and fat) and converted by the liver into chemicals such as 11-hydroxy-THC and carboxy-THC. Cannabis is eliminated in feces at a rate of around 65%, while urine accounts for 20%. The leftover amount might be kept within the body.
THC deposited in bodily tissues ultimately re-enters the circulation and is processed by the liver. For frequent users, THC accumulates in fatty tissues quicker than it can be removed, thus it may be detectable in drug tests for days or weeks following consumption.
The detection time varies according to the amount and frequency of cannabis usage. Higher dosages and regular usage result in longer detection times.
The type of drug test also affects detection windows. Blood and saliva tests typically detect cannabis metabolites for shorter periods, while urine and hair samples can reveal use for weeks or even months. In some cases, hair tests have detected cannabis use over 90 days after consumption.
Detection Windows for Various Cannabis Drug Tests
Urine Tests
Among all drug tests, urine testing is the most commonly used method for screening for drug use in an individual.
Detection times vary, but a 2017 review suggests the following windows for cannabis in urine after last use:
– Single-use (e.g., one joint): up to 3 days
– Moderate use (around 4 times a week): 5–7 days
– Chronic use (daily): 10–15 days
– Chronic heavy use (multiple times daily): over 30 days
Blood Tests
Blood tests generally detect recent cannabis use, typically within 2–12 hours after consumption. However, in cases of heavy use, cannabis has been detected up to 30 days later. Chronic heavy use can extend the detection period in the bloodstream.
Saliva Tests
THC can enter saliva through secondhand cannabis smoke, but THC metabolites are only present if you’ve personally smoked or ingested cannabis.
Saliva testing has a short detection window and can sometimes identify cannabis use on the same day. A 2020 review found that THC was detectable in the saliva of frequent users for up to 72 hours after use, and it may remain in saliva longer than in blood following recent use.
In areas where cannabis is illegal, saliva testing is often used for roadside screenings.
Hair Tests
Hair follicle tests can detect cannabis use for up to 90 days. After use, cannabinoids reach the hair follicles through small blood vessels and from sebum and sweat surrounding the hair.
Hair grows at approximately 0.5 inches per month, so a 1.5-inch segment of hair close to the scalp can reveal cannabis use over the past three months.
Factors Affecting THC and Metabolite Retention
The length of time THC and its metabolites stay in your system depends on various factors. Some, like body mass index (BMI) and metabolic rate, relate to individual body processing, not the drug itself.
Other factors are specific to cannabis use, including:
– Dosage: How much you consume
– Frequency: How often you use cannabis
– Method of consumption: Smoking, dabbing, edibles, or sublingual
– THC potency: Higher potency can extend detection time
Higher doses and more frequent use generally extend THC retention. Cannabis consumed orally may remain in the system slightly longer than smoked cannabis, and stronger cannabis strains, higher in THC, may also stay detectable for a longer period.
How Quickly Do the Effects of Cannabis Set In?
When smoking cannabis, effects appear almost immediately, while ingested cannabis may take 1–3 hours to peak.
The psychoactive component THC produces a “high” with common effects such as:
– Altered senses, including perception of time
– Mood changes
– Difficulty with thinking and problem-solving
– Impaired memory
Other short-term effects can include:
– Anxiety and confusion
– Decreased coordination
– Dry mouth and eyes
– Nausea or lightheadedness
– Trouble focusing
– Increased appetite
– Rapid heart rate
– Restlessness and sleepiness
In rare cases, high doses may lead to hallucinations, delusions, or acute psychosis.
Regular cannabis use may have additional mental and physical effects. While research is ongoing, cannabis use may increase the risk of:
– Cognitive issues like memory loss
– Cardiovascular problems including heart disease and stroke
– Respiratory illnesses such as bronchitis or lung infections
– Mood disorders like depression and anxiety
Cannabis use during pregnancy can negatively impact fetal growth and development.
Duration of Effects
Short-term effects generally taper off within 1–3 hours, but for chronic users, some long-term effects may last days, weeks, or even months. Certain effects may even be permanent.
Bottom Line
The amount of time that cannabis remains in your system following a single use varies greatly depending on individual characteristics such as body fat, metabolism, frequency of use, and mode of intake. Frequent users may maintain traces of THC for weeks, whereas infrequent users may test positive for as little as a few days. Hair tests can disclose usage for up to 90 days, while blood and saliva tests identify more recent use. Urine tests are the most popular and have varying detection durations. The duration that THC and its metabolites are detectable will ultimately depend on a number of factors, including dose, strength, and individual body chemistry.
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