Cannabis Chart Of The Week: CA Vs. NY Cannabis Markets – “The Irony Of Unintended Consequences”

  • The chart shows the YTD returns on two stock groups normalized for the MSOS ETF return. The green bars represent companies who are ROs in New York, possessing one of the ten original licenses. The orange bars represent companies either entirely in California or highly levered towards California.

  • The California group has significantly outperformed the MSOS ETF YTD, whereas the group, except Acreage (ACRDF: OTC), had significantly lower performance.     
  • The divergence relates to disparate regulatory happenings in the two states:
  • has delayed promulgating cultivation regulations regarding the original license holders pictured in the chart. The delays are likely to translate into a later start date for adult use and a market that will struggle to provide sufficient supply.

  • Meanwhile, as discussed in our May 16th Chart of the Week, California is finally getting serious about fixing its cannabis mess. Legislation expected to pass on July 1st will eliminate the $161 per pound cultivation tax and significantly help the state's struggling farmers.

  • The Ironic Law of Unintended Consequences:

    • California developed its cannabis industry without explicit attention to social and made no attempt to keep large competitors from forming and potentially dominating its market. However, over-taxing and over-regulating resulted in a  market virtually …

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