CA - Cannabis Investing Podcast Roundtable (Transcript)

Summary

• The first ever cannabis investing podcast roundtable discussion!
• Investing in the cannabis industry: stocks, ETFs and patience.
• Honestly assess your risk profile.
• Mistaken assumptions around illicit to legal markets. Confronting synthetic cannabinoids.
• Excitement over young markets like Oklahoma while bigger markets like New York get figured out.

Listen on the go! Subscribe to The Cannabis Investing Podcast on Apple Podcasts or Spotify .

Transcript

Rena Sherbill: Okay. Welcome to the first, I don't know how many there are going to be, but this is the first, yeah. This is the first Cannabis Investing Podcast Roundtable Edition. And I'm super excited to have everybody here. Well, you know what, I'm going to let everybody introduce themselves actually, rather than me ramble off a bunch of names and podcasts. How about everybody kind of gives their name, their podcast and also maybe like a nugget, not necessarily what's written on Apple Podcasts or Spotify, but like a nugget about the core of what their podcast is about and for.

Javier start -- let's start with you. First of all, Javier, sorry, but welcome back to the podcast. You were on close to the beginning. Yeah. Welcome back.

Javier Hasse: Thank you so much for having me and for having us and putting this together. I think it's going to be fun. My name is Javier Hasse. As I mentioned, I'm from Argentina. I've been covering cannabis for about a decade now, cannabis business and finance especially. And at Benzinga specifically, we host a podcast called Cannabis Insider with my co-host, Elliot Lane. We go over the news twice a weekend and have guests on every show. Usually it's C-suites from large cannabis companies, mostly publicly traded or big investors or money managers, but also celebrities and smaller brands.

We try and keep it as inclusive as possible. Of course, the larger companies, the CEOs of the NASDAQ and New York Stock Exchange traded companies pull a bigger crowd. But we want to provide opportunity to everyone. A bunch of people are doing super interesting things. And a lot of private companies are just remaining private because they don't need to go public. So very interesting. Check it out, Cannabis Insider, every Tuesday and Thursday at 4 pm Eastern, 1 pm. Pacific. And if you're down here in Argentina, it's about 6 pm. So...

RS: Same as in Tel Aviv. Dime boys..

Bryan Fields: I'll go first. Bryan Fields, one half of the Dime Podcast. The Dime is a weekly podcast where we dive behind the why and the how, what's going on in the cannabis industry. And I think one of the most fascinating aspects is that you see all these headlines, but understanding how these decisions are made, and most importantly, what can be learned through the experience so that others that are maybe farther in the process can learn from these executives to make better decisions in the future, kind of focus on our podcast. And I'll let Kellan kind of fill in the blanks.

Kellan Finney: I'm Kellan Finney. I'm the other half of the Dime podcast. And the goal of a lot of our -- having our guests on, is really to kind of create these natural conversations where they're able to explain some of their reasoning and the thoughts behind their strategic moves in an unscripted fashion, and kind of just as natural as possible. So that's kind of what we strive for.

RS: Patrick, round us out.

Patrick Aylward: My name is Patrick Aylward. I'm over in Ohio. My podcast is a part of a packaging and compliance business that I own. So we're trying to engage with our audience, and learn more about the cannabis industry supply chain. We do that by interviewing guests who are from different aspects of the supply chain. We've had about 10 episodes so far. So I think we are the youngest podcasts out of the Roundtable here today. But we've gotten some pretty interesting ones.

I've interviewed a few processing companies. I've interviewed a few like holistic kind of approaches, where a friend of mine that owns like a hammock and holistic massage company. And I've got some people slated who will be from like summits here in Ohio. So it's all on the smaller side. Where everybody else is interviewing CEOs and whatnot, I'm interviewing and intentionally trying to find the electrician in the back closet, or maybe the budtender who isn't getting spoken to, mainly just because I find it as a really great way to learn about our supply chain.

I do a lot of educational stuff by everyone at the Roundtables Podcast in learning how to approach CEOs. So the conversations that I have might be conversed to those groups of people.

RS: Yeah, it's a nice point, Patrick, because I feel like one of the things that everybody here might have experienced, well, almost everybody here was at the Benzinga conference in Chicago. And one of the things that I loved about it was I got into a lot of conversations, not just people that were directly in my line of -- typical people I would communicate or reason for career wise that I would want to communicate with, but people that were in lighting, people that were doing this -- and really just there for the love of cannabis.

And it's something that I connected with you guys with, personally and online. And something that I really enjoy about working in this space is I think almost everybody that I've talked to is coming because of some love or advocacy or passion around the plant, around what it can do. And that fills me with a lot of inspiration. So that was one of the reasons behind and kind of the inspirations behind this conversation is, you know, being able to bring voices together that maybe wouldn't necessarily come together for the sake of the podcast. Anyone want to add anything to that, happy to? Yeah. All right. So yeah…

PA: Yeah, I was just going to jump in with, me and you have had this conversation separately, where like, I'm really bad, where I think everybody is so much further above me or they've been in the industry much longer than I have. But something that I really enjoy about being in Ohio, that is a medical market that's rather young, who wants to be an adult use market is that sentiment that everyone I meet just really loves being here, because everyone's very just grateful to be a part of cannabis. So I've enjoyed and experienced that sentiment across the board, as well.

BF: I think you kind of have to, right, because the industry is so littered with challenges. So if you don't have that kind of passion to be involved, you're going to struggle in a lot of areas. And I think recently, we've seen that some people assumed getting in, that changes would be on the horizon. And because of that, when those changes didn't happen there were a lot of kind of setbacks and differences that needed to be adjusted.

RS: Yeah. So one of the things that I feel like is worth talking about as we cover the industry is, I started covering it in 2019. And I think we've all seen a real change in terms of what's happening in the industry, what types of players are operating the companies, how well those companies are doing. We've also seen it change in the past few years. How are you all approaching it A, I think, without losing a bit of faith in everything, in capitalism, in operators, in the stock market, in investing, in retail investing? And then also how do you stay inspired? And what is kind of how are you thinking about spreading the message or being a platform for a message?

JH: I can go first if you don't mind. I mean, personally, I've probably lost faith in capitalism as a teenager. Then regained it when I started winning.

RS: We're here to be honest people.

JH: I tell people very often right, like legalization implies regulation and then in the US, America is like the Mecca of capitalism. What did people expect would happen, right? I am personally -- I don't know if I'm disenchanted or anything, I see things progressing in the right direction, a lot of things. Of course, again, the fact that this is happening in a capitalistic context does mean, does imply that many of the bigger players and corporate players are taking ownership of the cannabis industry. But when we were advocating for legalization, it was never about making growers, millionaires, it was about providing people with access to medicine, about people not going to prison, about social equity, about racial justice.

And honestly, legalization is accomplishing all these things, right? Whether we like the outcome or not, then we need to look into what we're making of America. It's not cannabis. But the setup of how America and capitalism in general are set up, really. So I don't know if I'm disenchanted at all. I celebrate every small step and call out any BS going on. That's as much as we can do, I think.

KF: I think it's also important to look at, like other industries from a historical perspective, right. And I think of an interview, I watched with Jeff Bezos in the early 2000s, when he was talking about Amazon ( AMZN ) stock price went to like $6 from $100. And he said he was looking at all the internal metrics, right? And even though the stock was going down, his internal metrics were still really strong in the organization. And I mean, I look around in any state I visit, and there's still a very serious demand for people consuming cannabis. And there has been since I've been in high school when before it was legal, and I don't see that going away.

So like my faith remains in the industry, because like, I think that cannabis inherently is a commodity that's going to continue to be consumed by our society for the foreseeable future. And I think that you need to take a grain of salt when you are looking at the health of an industry only through like a stock price.

PA: I think like that beginning conversation we were having really ties into it as well for me. And that might just be because of me being like the younger of the crowd, but just the fact that every time I go somewhere, if it's here in Ohio, if it's out in Vegas, I missed Benzinga. That was in Chicago, but I saw so many people that I admire going there. And I just personally think that it has to do with everyone's excitement towards it.

I mean, there's a lot of things to be discouraged by, I don't know how everyone did. But I was one of those silly people who entered at the height of everything going up in 2020, when Biden was getting into office, and that's when I purchased a lot of stocks. And although I've seen a decent amount of loss from that, I'm not discouraged by it just because that was me being ignorant young investor, and learning that I'm here for the long haul.

So now it's up to me to educate myself, watch the market and kind of readjust while I wait for things to bounce back. Or I wait for other businesses to fold into each other or make different moves. So for me, I'm always excited by the people that I meet. And then feeling like I just need to learn a little bit more or pay attention to the right things.

BF: I think it's really well said by everyone here. And I think at the end of the day, the thesis is the same right? In the last five years, we've seen it be a state-led story and continue to be a state-led story. Bigger states continue to come online and operators are going through growth hurdles and learning curves as every early industry continues to be and I know everyone wants to fast forward through all the consolidation efforts and all the ups and downs. But end of the day, the industry is still in its infancy stage. And I think sometimes that's hard for people to recognize that we've had massive progress, maybe not the massive that we want. But from a state-led story we've had incredible progress.

RS: Also, I would concur that everybody was very well spoken. It's like you guys all have podcasts or something. Patrick, to your point about feeling like a novice when you're -- when it comes to investing, I too got in close to 2020 for the first time. And I've been working for an investing website, Seeking Alpha for a long time. And felt like I had availed myself to many people's expertise and knowledge that was much stronger and more developed than mine. And I was extremely disappointed that I didn't sell some of the stocks or I didn't reinvest at a certain time or I was waiting for another top.

And I was -- what's the word I can use, moaning about it to my boss and saying that I was kind of disappointed in things that I had seen and things that I hadn't seen. And he was saying there are people that have been in the market for forever and ever and ever and ever and made the same mistakes.

JH: I mean, listen, not even the Warren Buffetts of the world could anticipate the housing bubble, right? There's a movie about the one guy who figures out the housing bubble is about to burst when everyone was watching it from the outside or whatever. And like now in retrospect, it's like it was so obvious this was not sustainable. It was so obvious this was going to happen. With a crystal ball with -- I don't know -- if this is an expression in English, but with Monday's newspaper, it's easy to go like, oh, yeah, of course, I should have seen this coming. But deep down, it's like, thinking about what Patrick was saying is like, dude, just hold the stock. That's what I would do, like, just five years, seven years.

The smartest investors out there are actually, like long term investors, like the most successful hedge fund money managers, whether you like Warren Buffett, or you like Bill Ackman or whomever you like. Usually, it's fundamental investing long term, just buy, hold. And usually the trend goes up, or at least we would hope so.

RS: Yes, yes. That's definitely what we're espousing, what I'm trying to espouse on the podcast. Do all of you guys agree with that? Are all of you long term invested in the -- I mean, I guess I would assume so given our…

PA: Yeah, I'll even speak -- I'll even jump in and speak to why because I got laid off in the pandemic, from my previous chef career. And I've always wanted to invest disposable income, and I've never had the time to figure out how. So I use 2020 as my moment to be like, yep, this is how I'm going to learn. And after doing months worth of research, it's like, okay, I'm never going to put the effort of course to learn how to properly become an investor and really make money. So every bit of advice that I did come across said, do what you like or invest in what you think is cool, or maybe I'm choosing bad verbs here, but really just choosing to invest in cannabis.

So for me, it made sense to become a long term investor just based off of that, and I'm still riding that wave.

BF: I think one of the things that got me into trouble was during the cannabis wave, the numbers were just shooting up so fast. And I think emotionally, you kind of get hooked on those quick gains. And I think at the end of the day, it's a long term picture and kind of going back to your core strategy of understanding that, I'm building a position in these companies for the long term. And as more states come online, the better they'll be and the stronger they will be coming. Again, it's still early and I think it's just hard to process after we've seen such quick growth, but also such quick come downs.

KF: Yeah, I mean, cannabis is the only reason I ever even got into investing. I was in the cannabis industry as an operator, and I watched Tilray go through the roof in 2018, right. And I was like, what is this whole investing thing? And that's actually what got me into investing in the first place. And of course, it was probably not the greatest timing, right. I was probably on the very tail end of the increase in the bell curve, before we got to experience this downslide.

But I mean, I just continue to think that it's a long term game, just based on everything I've read from an investing perspective as well. I don't think the industry is going anywhere. And I think it's only going to continue to get stronger, especially as the whole country comes online, and hopefully, in the future, that we have an international market as well.

RS: Speaking to that, Tilray and the international focus or perspective, how would all of you articulate your approaches or thoughts on the differences and perhaps maybe even a similarity or two between Canada and the U.S. and the stocks that are operating in those two markets?

BF: Well, the Canadian…

RS: Sorry, I was just going to say it can also be companies it doesn't necessarily need to be publicly traded?

BF: Well, I think it's from a timing perspective. Again, I think the Canadian companies that had expectations to be bigger, faster, and we saw the numbers kind of come back down when they didn't meet expectations. And now what you're seeing is that a lot of them are trying to diversify their businesses into kind of ancillary add-ons for example. I don't know the companies off the top of my head, but would start getting back into tomatoes as they try to diversify their revenue.

And while I understand in the short term, trying to fluctuate through the ups and downs, it wouldn't surprise me if U.S. companies took a similar approach if they continued on that path, because I think there's expectations to hit stable numbers, especially some of these publicly traded companies. And with variability of cannabis, it wouldn't surprise me to see some of them at least consider that in the near term.

JH: Yeah, I mean, there are some in the U.S. I know, like you're talking probably about like Tilray ( TLRY ) or Village Farms (VFF) in Canada, but even in the U.S. Glass House Farms ( GLASF ), where I just grow vegetables in the facility they have in California, right. And it makes sense. In Canada assumptions were, I mean, every report I've ever read, or 95% of the reports I ever read for market estimates, for market sizing assume a super fast conversion from illicit markets to legal markets. And that just doesn't happen, right?

I've seen estimates for Brazil, oh, yeah, this will be a market of $2 billion next year. How are you even, arriving at this number? And their response is? Well, we're assuming that 50% of cancer patients convert to cannabis. And it's like, yeah, that doesn't happen, especially not overnight, especially not in a year. But it does make sense to hedge some bets, right and diversify. We ask every other industry to be diversified, and suddenly, if cannabis does it, it's like, yeah, you're not focused enough.

PA: I'm curious if a country like Germany is taking notes on what both North American countries have experienced, because to me, the point Javier was making earlier in the conversation about, us making a movie about the one person who noticed the 2008 housing bubble, I'm sure that there's not too many people who thought when Canada went online, that Canada itself as an operating country, thought that they were going to supply cannabis to the rest of the world without any regulatory hurdles, or any real difficulties.

And then here in the United States, I think it's happened a lot where a lot of multi-state operators get involved. They find a way to hit a SPAC and get listed. And then they think they'll be able to permeate every state and really, like have a place in the stock exchange. And I think, as the regulatory hurdles keep getting taller, that vision keeps getting smaller.

So I'm not really sure how to answer the initial question. But I am curious at this point, if there are other larger international markets that kind of pay attention to what we've been doing, and try to take some notes, because I personally wouldn't be -- as I'm not surprised that either North Canada or the United States has figured it out. Because when I got involved with all that, watching in 2019 and '20, I would have thought some type of change would have come for us.

KF: I think it's all about managing expectations, right? I think if you look at Canada, and you look at the cannabis industry from like a fundamental perspective, it's an agricultural industry. And if you look at Canada globally, I don't know many agricultural markets that Canada completely dominates, right from an agricultural perspective. And so I think at the end of the day, from an expectation standpoint, Canada just isn't meeting this grandiose expectation of dominating the entire global market, because Canada is cold a lot of the time, right.

They're growing cannabis indoors that affects pricing. It affects labor, like all of these variables go into that. And I think at the end of the day, the expectations were mismanaged because they were the first one to be legal, from a federal perspective. But they're also not set up to be an agricultural powerhouse that has access to really low labor, and all these other things that facilitate very profitable agricultural companies in my opinion.

RS: And the longer the regulatory picture takes to develop internationally, the more capital they need, and…

KF: To survive, yeah.

RS: Yeah. And that capital is very limited.

KF: And expensive now.

RS: Yeah.

JH: Whenever I go to Colombia, I try to visit maybe four or five times a year, it's a very interesting cannabis market. And one of the things I say about Canada is like, dude, we're not growing anything else in warehouses? We're not growing mangoes and bananas in warehouses, right. Like this only makes sense as a meanwhile. This is not a long term sustainable practice, right growing cannabis indoors. I mean, beyond pricing. It's just like, messed up for the environment, big time. It's not something that we can even allow in 10 years, I think.

RS: And yet, it's what like, apparently, a lot of consumers in my beautiful home city of Tel Aviv seem to want. So interesting. I mean, they're importing that hand over fist indoor grown Canadian cannabis. I mean, I don't think it's -- it's a limited market. And it's not a legal adult use market. And I think that plays into it, obviously, but also interesting, when things -- because that's not what we have here on the illicit, or the medicinal market. So it's just interesting to see what people do want when they don't have it nearby.

Thoughts on what you -- what markets you guys are excited about? It could be in the States, it could be international. And also, I just wanted to mention, Patrick, to your point about like, whether or not Germany or other countries are looking to states going online, or countries like Canada that have gone online, I think they're definitely looking at it. And I think they're definitely paying attention to what's working and what has not worked so well. And not always executing properly. But I do think they are trying to pay attention.

PA: I think we're all -- I mean, I hate to speak for all of us. But I feel as if every time I get on to any media platform that's involved with cannabis right now, everyone's always talking about New York. I think that's the like, quick, easy one where we're all kind of like waiting and waiting. And they started sales. But does it like really count because there's only one store? I know, for me, this is an unpopular opinion.

RS: Oh, three, now.

PA: Oh, it's three Thank you.

BF: Major breaking news, major breaking.

PA: It is, it is.

RS: It is still wrapped up into like Washington.

PA: Oklahoma, there's just something to me about the idea of really competitive market like that. And there's this young employee, he doesn't really know a lot. He's got a chip on their shoulder, and they're just in there experimenting and learning and just growing. So I don't know, I know oversaturated markets are distasteful because they breed for legacy issues that we're not fond of. And then they have regulatory problems that are kind of hard to fix afterwards.

But I do like the idea of competition, because when we're talking about cannabis as a commodity, I feel like more states coming online, that create more licenses breed more competitiveness. And I think that competitiveness will bring the price down as a whole. And that will change everything about our market in a really positive way. Sorry, I went a little further away from the question than you started.

RS: No, no, all good.

BF: New York has a bunch of interesting kinds of conversations. And I think the main crux of the problem is twofold, right? They want to try to keep MSOs on the sideline in the early term, to give others an opportunity to kind of get started and thrive. But I think by artificially trying to create a market, you're really enduring the real aspects of the market, which is you need to really reduce the access to the gray market or the traditional market in the near term.

And I think another issue that needs to be considered and this is an assumption of mine is that New York is investing in these licenses and I want -- I believe that they want to ensure the value of these licenses so that they are setting up the market in the near term specifically in order to make sure that they get their return on their initial investment. And while there I don't agree with the limited license opportunity, Kellen and I argue relentlessly about this, the pros and cons of this him being in Colorado, me being in New York , I understand some of the merit of it, but I wish they would open it up and allow the market to compete. So that strong could survive. And while I know it's challenging, because a lot of people want to be in cannabis and deserve to be in cannabis, it's not a participation trophy, right?

Business is an opportunity to succeed. And there are tons of challenges, and a lot of people fail. And unfortunately, that's just the reality of it. And New York, it's going to be even harder for that.

PA: Something that's interesting from where I'm standing at in regards to a limited license conversation is, Ohio started out with like 26 operations for cultivation and processing. And I think maybe we'd gotten up to 32. And the interesting thing that's happened there is, our Board of Commerce isn't allowing new licenses, but current license holders are allowed to white label.

So you see a company who has the capability to -- like their facility is large enough to bring on new SKUs, and they're continuously bringing in companies from other states. And I think that that's interesting, and I will hear certain business owners argue -- I don't know about the fairness, but just the ability of a company out of state to get involved, versus somebody who has an idea here in Ohio, who wants to get involved.

So I don't know. That's another interesting aspect of my limited license state going on at the moment.

KF: Yeah, and I think that that actually, you'll see get played out in New York a lot, right? Kind of individuals or entrepreneurs looking to get into the industry. They don't want to pay for all the infrastructure. And that's kind of a traditional way to launch a brand, is you contact a manufacturer, you work with a manufacturer to meet specific product specifications that you're looking to encompass in your product, and then you launch it.

And I think that New York is going to be one of the most interesting markets to watch that develop, only because New York is global. Like the access they have to the rest of the world from a branding perspective is massive. And so I think that New York's once eventually they'll get it right, every state goes through this kind of growing pains and hard times and lawsuits when they first launch their market, right, but I think once they actually kind of hit their stride, they have the opportunity to help curb the cultural stigma associated with cannabis on a global level.

And so I think that's why I'm most interested in kind of seeing how -- seeing what brands actually get a foothold in New York, because I think those are the brands that are going to be the first to be global brands in my opinion.

BF: Kellan, how long to hit the stride, three years?

KF: Probably, yeah, probably three years. I mean, you're going to have a lawsuit. So that's going to take probably 18 months to settle.

BF: The consumer is the one who loses in the near term, right?

KF: Yeah, of course.

BF: There's limited access to products. And maybe the products aren't to the type of quality consistency level that are expected. And they might continue to go back to the traditional market in the near term in order to suffice, accessible price and quality.

KF: Yeah, I mean, I think at the end of the day, that you'll have that ebb and flow for a couple of years until the retailers get it right, and the prices hit competitive levels. I mean, if you look at like Colorado, right, like, I don't know, anyone in Colorado that purchases cannabis from a drug dealer anymore. It's just not a thing, right? It's just not worth it, right. And then now you factor in once delivery takes over and stuff like that, it's just going to become so much more convenient, right?

And then you're going to have so much more trust built into the system, because that's the one thing the legacy market will never be able to truly compete with, is being able to provide a regulated product, that's clean, it's tested, that's safe, that goes through this entire gamut of other people that are certifying that nothing terrible is going to happen to you from ingesting this product.

RS: If I may, I'm curious what you all think of this, because Kellan, to your point about the Colorado illicit market, it's something I was just talking about with Nancy Whiteman , from Wana Brands, and she was coming back at me in terms of that there is an illicit market problem in Colorado. It's just not as strong as the illicit market problem in California and New York. And one of the things she was pointing to was the synthetic kind of market and how much of a problem that is. What are you guys hearing, thinking, talking reading about that specific concern lane of the industry?

KF: I think the synthetic market is literally only a byproduct of states that don't have legal cannabis access, because that is what's truly driving the synthetic. And let's be frank, all synthetic cannabinoids are derived directly from failing hemp companies. So these are companies that poured a ton of money into manufacturing CBD. They have mountains and mountains of CBD isolate. And they are businesses and this is a capitalistic society, and so they need to make money.

It turns out if you take all that CBD and synthetically convert it into Delta-8 turns out a bunch of states that don't have access to legal Delta-9 are just gobbling up that Delta-8. And so I think that because we're a whole country that's facilitating this massive proliferation in synthetic cannabinoids, and listen that synthetic cannabinoids are strictly only being derived from hemp processors that are failing because they jumped into this industry into the hemp industry, which I think is very different than the cannabis industry in my opinion.

JH: I am curious as to what Nancy meant when she talked about Colorado specifically. If these synthetic products are being sold in Colorado, or simply produced in Colorado and then sold across the country. Either way, it does seem like I personally am not a fan of Delta-8? I've tried it, it's not the best effect. I do understand that whenever there aren't any other options, it's great. Don't get me wrong. I went to South by Southwest in Texas and you can't get weed legally there. So I'm definitely on board, would winning with something like cigarettes where they are like -- I don't know, they sell these packets, like or whatever.

But I think there's also an affordability aspect to it, right? Like down here in Argentina, good wine comes in a bottle. And then there's more affordable line that comes in a box. And there's different price points. And it's essentially the same product, but produced under very different conditions. This kind of makes me think of that situation, where a Delta-8 product can only if you can sell it at $4 a gram it kind of makes sense that it's an option for people.

I don't love it. I don't think it's great. I don't think it makes a lot of sense. But until we have very fair trade and international trade of cannabis, we won't be able to access $2 or $3 a gram of cannabis cultivated in Colombia, or even in markets like Oklahoma. I loved the Oklahoma example that Patrick brought up, right, because I do feel like a lot of people who would have never had the money or expertise to access a license anywhere else just spent $2,000 and got a license and got the possibility to experiment a little bit.

So -- and I don't think in Oklahoma, the adult aid market is huge, because market prices for cannabis are pretty affordable. I don't know, I might be wrong. But I would love to know if like Rena, did you hear anything about Delta-8 in Colorado or…?

RS: I didn't hear any specific numbers. But her point was speaking to not just the cheapness of it, but also the high effect that they're looking for something that has an outsized effect to what you're taking.

JH: Oh, yeah. Well, I met a bunch of people like super serious people, researchers, or even like people who review cannabis who love the Delta-8 high. They're like, yeah, we'll take 1,000 milligrams, you have no idea how stoned I am. It's valid. Again, it's not my jam. I am a low THC dose kind of guy. It's more like two puffs, I'm happy. But I do understand that some people want to be stoned out of their minds. And this is America. As long as you're not harming anyone, as long as you're not driving while stoned you should be fine. People can drink an entire bottle of whiskey and no one will tell them anything as long as they're in their homes. So…

PA: I think the interesting point from that conversation is something I hear from operators on my podcasts a lot is education. And one of my guests had brought up a point where you're only willing to educate your customer or patient, however you like to refer to them as much as you want them to purchase the product. And I thought that was a really enlightening way to think about educating the public because on that framework, and in that conversation, I think there's so many people.

I'll speak to the United States that will live in a state that's legalized and in their brain legalization means that they can go to a gas station or a grocery store and buy cannabis. And because there's no one from point A to point B to tell them different, they see a Delta-9 and Delta-8 THC product inside of a gas station and they say, all right, that's my most comfortable way of trying this product. I don't have to talk to anybody. It's right in front of me when I'm purchasing something else. It looks safe to me because I don't know any better.

So I think that coupled with the point Javier was making, which a lot of us know, once you get into legal market is that there's a group of patients and customers who have been doing this for a really, really long time. And their tolerance might be high for cannabis, their tolerance for the price that they pay might be low. So I think people will gravitate towards those products for those reasons as well.

And for me, as somebody, I've been consuming cannabis since I was 16, 17, for like ADHD, and whatever reasons, I didn't learn at that moment in time. And I got arrested for petty possession throughout all those years. And nothing excites me more than going into a gas station and seeing a cannabis-based product, I mean, yeah…

JH: It doesn't matter if it's a balm, right? Whatever. It can't be like lip balm.

PA: And the point about it being America where it's up to me to decide whether or not that product is safe enough for me to try. And 75% of the time on a product like that at a gas station or shady Bodega or a truck stop, I'm not going to purchase it, but for the off chance that there is somebody outside of that store telling me about that product, I'm game to try it. I'm game to give some gas station CBD a shot assuming that it is worth it. So I know that's not like a full opinion. But on the other side, I really like arguing for and against that CBD Delta-8, just because it's all part of a cannabis to me.

RS: It's is, but it's like how are you getting it?

KF: Yeah. I said, I think it's tough because I think it's like a speed limit kind of conversation, from discussion perspective. Like, you can drive as fast as the speed limit says, but when you start driving faster than the speed limit, society has determined that if you're going 75 and 55 that you're now -- your decision is putting other people at risk.

And so I think that -- yeah, if someone goes into the gas station, and they purchase this product, they may be purchasing something that they unknowingly are putting themselves at a risk that they're not used to. With whiskey, we understand as a society, from an alcohol perspective, what the potential risks associated with ingesting a bottle of alcohol are.

We do not yet know what the potential risks for ingesting these brand new Delta-8 synthetic cannabinoids and there may be nothing intrinsically wrong with the Delta-8 molecule. But there may be something intrinsically wrong with the method to get to that molecule and the byproducts associated with that, that are still in that mixture that you're ingesting. And there's just no regulatory body or anyone actually like checking it out to see what there could be in there.

And I think that's the biggest concern I have with the conversation about Delta-8 is because like we saw what they gave to the whole industry, right? What if something like that happens with one of these rare cannabinoids that then just kind of sets us back another couple of years in the Senate to get Safe Banking passed or, or something that provides relief to the industry as a whole from that perspective.

BF: Yeah, and those places are also competing with retail right. At the end of the day, they're still competing. The customer who's making decision in that store is not buying it from the other one, just based on one they're making the purchasing and the other ones we're operating legally have the licenses. They're paying 280E They're dealing with all those cannabis space challenges and to compete in a market as challenging as ours but also face these other challenges who don't have any of those obstacles, it's another big hindrance to the industry as a whole.

RS: It's also I feel like those consumers tend to skew young, which is also more problematic.

BF: Yeah, or sometimes really old, just making a poor decision.

RS: And to your point, by the way, that it's like an American thing. I was just talking about this with a friend of mine who in Europe it's similar. There's like crappy CBD flower or what have you in the gas stations and it's super fun for people to see even like more sophisticated cannabis consumers, and oh well, Europe look. And most of my friends have bought it and been severely disappointed. I imagine a lot of people are more than disappointed though I imagine there's bouts of various things happening after smoking that stuff.

KF: Is there a Delta-8 issue in Tel Aviv, Rena or Europe at all that you know of?

JH: You had the Mr. Nice Guy which is much worse. I tried that and it was like the crack of cannabis? It was like insane. It's like a bunch of herbs. Imagine like let's say lavender. It's not lavender but imagine you got lavender and sprayed it with something that is a mystery. And for a while until the now I think they're banned. Very heavily banned but for a while there for maybe four or five years you had on every other corner, a low shot that sold these herbs that were just insane. They were not meant for human consumption, which of course, they sold the papers right next to them.

And that was insane. And as it relates to Delta-8 it makes me think about there's this TV series called The Good Place. And one of the things that they say is, it's so American to take something that is great and make it a little bit worse so that you can have more of it. So take frozen yogurt versus ice cream. Same thing with this Delta-8. It's like, okay, I want to have like a bunch more weed. How do I make this happen?

RS: That's amazing. It's like the weed that you had to order from the back of High Times in like, 1992.

In terms of looking at investments across the space, kind of piggybacking off of a point that we made earlier, in terms of, maybe it's going to be smaller operators that are able to navigate this space a little bit better, that are beholden to the expectations for growth and the need to be in many states or the need to have been in many states, and now are working your way towards divesting out of them. What are your thoughts about companies, it doesn't have to be public, though, if they are happy to hear that too, in terms of where people should be invested in the space?

BF: I guess it all comes back to what your risk profile is, and understanding what the horizon is. For me, I'm focusing more on the Tier 1 MSOs. And I'm selecting the ones I think have a long term strategy, not ones who did growth at all costs. And I think fundamentally, when you look at it, it's a state-led story. And there's a lot of states that are going to come online, for example, Florida is going to turn to adult use. Georgia is getting started with their medical markets very limited. Pennsylvania is kind of getting going.

And those are the type of opportunities where I think if you've got foothold in those limited license opportunities, you have a chance to continue to, we can call it literally survive in the near term as the industry grows. And then eventually, when there's interstate commerce, which could happen anytime now, you want to have economies of scale. But you also don't want to have to kind of deal your cards back in internally to divest your assets to then expand, and you want to make sure you've got a strong near term approach, but also a very strong long term approach to navigate all these unknowns.

JH: It's also very hard to stay on top of the news. This is a very rapidly evolving industry, and one where even the larger stocks have very low trading volume. So like stocks are volatile. So if you're not going to stay on top of the news, like obsessively I tend to recommend ETFs. And here's the disclosure, by the way. I do not own or plan to buy or short any of these equities I'm going to mention. But I do recommend you look into ETFs.

There's people who are dedicating their entire days and a bunch of time into understanding the market dynamics. So there's like [[MJ]] and [[MJUS]] and [[MSOS]] and [[YOLO]], and [[CNBS]] and [[PSDN]] and [[THCX]]. These are some of the larger cannabis ETFs. Maybe it's safer to defer some of these decisions in terms of how to balance your portfolio to someone who really, really knows the industry and is following the news very closely, because, like a big trade can move us up 20% in a day. And you're screwed if you're not super responsive. So I don't know, just like little tidbit there.

PA: Going off of Javier's point of being incredibly responsive, and doing lots of due diligence, I go on the opposite end, and just choose companies that make me feel like they are going to get my money. If I go to Vegas, and I go inside -- sorry, to call out the companies. But if I go to Planet 13 ( PLNHF ), and it doesn't make me feel like I want to be a part of that business, or I want to be a part of that experience, then I will gladly take those dollars and go give them to cookies that was down the strip. I mean, the experience between the two were night and day.

So for me, I'm investing in companies who make me feel good about spending my money inside of their stores, or I choose companies who are providing innovations that I think are really cool. Obviously we know I don't -- and if I'm wrong, please tell me. Puffco is not out there on the stock exchange. But if they were I'd give them my money right now because they really care about that aspect of it. So that's my response.

RS: What was your experience that was lacking in Planet 13, as long as you put it out there?

PA: Oh, yeah, it's okay. I think every dispenser I went to in Vegas -- sorry guys, except for Cookies, no one cared about the terpene profile when I asked. Nobody cared about THC to CBD ratios. It was very much show just like how much do you want to spend, excuse my language, how fu**ed up do you want to get? And it was not about like, what did I feel that night? What did I want to feel the next day? And I had gone out of my way to ask those questions, because I'm part time bud tender. It's like what I do for half of my day. So I very much care about it. And yeah, that was my reasoning.

BF: Can I push back? Patrick, the only thing I would challenge on that is that, that could be a single one-off event where you spoke with a one Budtender, right. That's not representative of the company culture as a whole. And I think one of the biggest challenges of these companies are scaling as fast as humanly possible, or at least they were, was that there was lacking in certain areas of expertise in educational areas. And I think as the industry progresses, I think those types of conversations will continue to improve.

And yes, that experience is definitely off putting for you. But for others, that might be the majority of the conversational types that they've worked through in their training.

RS: I also wonder if they weren't geared towards talking to a typical person, forgive the stereotype, going to a cannabis conference in Vegas. And it's like, most people do want to know just how fu**ed up they're going to get and not much else.

JH: Yeah, it's Vegas.

RS: It's Vegas baby.

JH: Vegas, it's very transactional. Everything about Vegas is transactional. But I did feel the same as Patrick in that sense. It was very transactional. It was like, okay, how much money you got? Let us take it, which is very fair, like, sometimes I'm in Vegas, and I just wants some weed, like, just give it to me fast. I expect it to be affordable. That's about it. Right. But to Patrick's point, it's definitely -- if you're looking for something different, then probably superstore isn't the place to get personalized attention, right, the same as Walmart isn't right. It's like -- this is the largest cannabis store in the world. It's supposed to be fun, not personal. And just like making both points. It's both are valid, I think. But this is like an amusement park. It's Disney World or whatever.

KF: Yeah, it'll be interesting to see how Planet 13 expands. And if they use the same kind of company culture and ethos in other cities that aren't kind of like a transactional-based city. And consumers are looking for more of that like personal feel in that conversation, like a personalized, the cannabis that they're purchasing for a specific outcome. From an investment perspective, though, I have a hybrid approach. I agree with Javier and the fact that if you're not actively monitoring the stocks on a day to day basis, you are exposing yourself to risk that is unnecessary.

And so, from my perspective, I do hold equity in ETFs, it's how I invest. I tried in the early days to like buy individual companies and ride them out. And I kept telling myself, I'm in it for the long run, right. But like, sometimes I just get too emotional when I watch a stock drop 20% month over month over month, right? Like, it's just tough to god. So and so I have a lot of faith in actively managed ETFs.

I know that like that individual is -- they have skin in the game as well. And they don't want to lose money as well. And they're doing it for a full time. So I do tend to favor ETFs as far as that goes. And then I do have a couple companies that are outside of my ETFs. One is Columbia Care ( CCHWF ), just because I'm from Colorado, and I go to the Green Solution a lot. So I kind of feel like when I shop at a Green Solution, I'm supporting the stock that I own. So there's like little nuances like that, right. That's my approach to the industry right now.

RS: I'm curious Kellan is speaking to the actively managed ETFs, there's a number of them. What is it? How do you pick which one?

KF: I pick -- so I picked Poseidon PSDN right. And I was in MSOS for a while. I have my own trepidations about how that ETF's been managed. I don't think it's like being managed as active as you're kind of led to believe right? I don't think it's like being active day to day kind of managed, if that makes sense.

RS: That it's too reliant on the state operators, the bigger ones.

KF: Yeah, exactly. And I mean, I have a -- I spoke with Emily a couple times. And I think she's a really, really smart girl. And if you look at how Poseidon has positioned that ETF during these tumultuous times, they've put a lot of the equity in more -- they've diversified. We talked about other cannabis companies diversifying, like I don't need to watch the whole industry go to zero and neither does Emily or Morgan and they've done a good job kind of shoring up that ETF to protect the majority of the cash that they have on hand in my opinion.

A lot of it is owned in a lot of Blackrock Treasury notes in the ETF. So that should prop it up and stabilize it. And realistically, I think that they're playing a waiting game. And once things start to kind of pick up and you see the capital markets pick up and all these other variables that professional investors monitor, they'll be able to kind of position the liquidity that they are going to have access to with those Blackrock Treasury notes, into companies to kind of catch the big gains that are going to come when banking passes and those things. At least that's my perspective on the situation that they're pursuing right now.

RS: Yeah, Bryan, do you want to give a few hot takes, I've kept you guys off for longer than I was planning to which I kind of was expecting.

BF: I guess my question would be to the group is more about interstate commerce. I think previously, a lot of people have thought that that was in the distant future. And now what seems to be happening sooner rather than later is interstate commerce. And I'm curious to know what the people on this call think will, A happen if that goes through and B, how quickly companies will have to pivot, the ones who aren't prepared in order to try to take advantage of big changes, or more specifically protect themselves from the various changes that will happen and then influence, things pretty quickly.

KF: Isn't it already happening in New York? There's a bunch of products with California labels on them right now. So…

BF: Yeah, it's really hard to tell a bunch of my friends that the California products they getting are not the ones that they should be getting.

JH: I mean, definitely not legally but there are states trying to create bilateral agreements. It is also very American to defy the federal government. And I really like that. We also saw just last week, or let's say a few days ago, because we don't know when this is going to air but Uruguay started shipping cannabis to the U.S. And there's a company completing up to 10 tons of low THC cannabis shipments, right. But what we're starting to see the floodgates open. And that won't be reversible.

Once the genie is out of the proverbial bottle that will be about it right? And it will make sense. Honestly, within the US, it makes a lot more sense to produce cannabis in I don't know, Arizona or California than Ohio or Michigan. And once we start seeing some of that happen, it will be very hard to stop it right even with the feds trying to stop it, it will be very hard to control, especially within like neighboring states, right, where products will be crossing through roads and say, not airplanes.

BF: And it'll happen really fast, right with economies of scale, and these companies be able to -- the ones who have the infrastructure to kind of scale up, the prices will come down and the accessibility will help a lot of brands get that type of reach up they're really looking for now.

KF: I think the biggest issue with interstate commerce is going to be the fact that like the states that Javier mentioned, that have those kind of like handshake agreements are going to be like -- they're already California, Oregon. I'm not sure if Washington is part of that whole thing. But like California and Oregon, they don't have a lack of product problem, right? Like they have to supply products.

So if like Oregon and California decide to start trading, Oregon is going to be like, hey, I have a ton of cannabis and California's going to be like hey, me too, and you want to just swap my pile for your pile, like the real commerce, the real interstate commerce that has to happen is the oversupply of cannabis on the West Coast needs to reach the East Coast, where they haven't built the infrastructure yet.

JH: And that would be really interesting thing, even where there is supply, right I'm just looking at the map of the U.S. because I'm not so familiar. But I'm looking at the neighbors of Colorado, New Mexico and Oklahoma. I definitely, I believe that it's much cheaper to produce cannabis in New Mexico and Oklahoma than indoors in Colorado friends, right? Even no matter how much supply you have in Colorado, what will probably happen is if they open interstate commerce, a bunch of people in Colorado will go out of business, because Oklahoma wheat will be much cheaper.

RS: But you still have to build out all those operations, you still have to know how to execute, you still know -- have to know how to build out, like, operate financially. I think that's the thing that always has stuck with me, throughout the ups and downs in the industry. And with interstate commerce, I feel like de facto interstate commerce if it's not official is already happening, like we've been talking about. So it's just a matter like every -- speaking to Javier's point about an American tradition, also state led initiatives are very much an American tradition.

And I think this is no different. And also I see it here being in Tel Aviv like a inner country commerce, is also going to be de facto. I see how people are transporting cannabis from medical markets in Europe and things like that. But I would say the thing that always sticks with me is even the companies that say -- that have operations in in more expensive states, it's still going to take a lot of time for smaller operators, in more financially advantageous places, financially advantageous places for them to figure out all those operations and to become such a consistent operator.

And I still think that even when the best operators have to pivot or maneuver or say no to an acquisition, or say no to a state that they got in, not always, but I think often the best operators figure that out. Ta da, ta da, I think we're at the end, you all. This was a really fantastic conversation. It was as -- well it surpassed my expectations, honestly. And my expectations, were high. Anything else anybody wants to get to that we didn't get to, anybody want to take other people's times more than I have?

BF: I'd like to do this. Again, I think this was all fun. It was fun to have these type of conversations and kind of break down the various topics. We all have different perspectives from conversations and experiences we have. And I think that's one of the best parts about cannabis is that each person's perspective and expertise and experience is completely different. But it all makes the industry kind of this mishmash of growing successful industry.

RS: Yeah. And I think speaking to the point of the need for education, I think one of my favorite things about podcasts and sharing platforms is just the chorus of voices. I think it always leads to a better conversation, but also better points about what's happening in the industry. So appreciate you all taking the time and sharing your energies and insights.

PA: Yeah, thank you. I do want to take everybody's time just a little bit longer. If you could each make it just a little quick, I was excited to hear everyone's individual like what they were excited about.

RS: About the industry?

PA: Yeah, whatever it was like, I know I prepared a few things. So if everyone…

RS: You go first

PA: All right, me going first, I'm excited about the new generation of kids. Here in Ohio, we got like three different universities that are trying to pop-up as cannabis universities when I go and attend to the events that we're all in the mutual space, I really like talking to the young people there. They excite me the most that anything just because of their bubbling, yeah.

BF: I think for me, I think the fact that this industry has so many challenges, the one area that excites me is the innovation that we'll have to come up with it because most of the teams don't have the normal tools that they can use from a marketing standpoint, or operational standpoint. And because of that they're having to bootstrap certain areas, but they're often to build on top of those things, which I think as the industry unfolds, and then the bigger players come in, they'll have to adapt their current framework in order to meet the expectations of the growing entrepreneurs, but also the flexibility nature and the skillsets of the people who currently operate in the industry.

KF: Yeah, I think I'm most excited about the technology innovations that are going to enter the industry, especially as consolidation occurs. There's a lot of companies that are going to work to optimize their internal operations. And I think that that's just going to kind of feed into a massive proliferation and kind of like smart technology that other manufacturing spaces have employed. So I'm excited to see how all that kind of comes together.

JH: For me, it's probably internationalization. Just want to see like international trade with low cost cannabis for people who need it, but also amazing quality cannabis that can compete with cannabis grown in the Emerald Triangle or wherever you prefer your cannabis to be from. I know a lot of growers around the world and a lot of different geographies have a lot to offer there. And as I've been traveling the world and trying cannabis and very different places, again, ensure that, you know there is a world beyond California.

RS: You heard it here first.

JH: That doesn't mean that the world isn't flat, two things can be true.

RS: We're only taking education so far. That's the clip. I'm going to close it out. I would say I'm most excited kind of synthesizing everything is I would say, for progress to keep happening and for legalization and the regulatory picture to develop. That benefits everybody because it's not just big business. It's not just the publicly traded stocks. It's not just getting people out of jail. It's not just stopping people from going to jail. It's all those things. And also once those things keep happening, there's a public expansion of consciousness about what cannabis can do.

I would add psychedelics to that conversation, but certainly cannabis, and just greater adoption and understanding. And isn't that what we're all here for? Thanks, you all. I appreciate you each individually and collectively as a group. Thank you very much.

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Cannabis Investing Podcast Roundtable (Transcript)