2021: The Tale of Winners, Losers, and the Tri-State Area Market

Even though 2020 may have been a tough year on main street, it was far from a tough time on Wall Street. December 31st, 2020, the final closing of the year, rang in stellar numbers:

  • Dow Jones Industrial Average = 30,606
  • S&P 500 = 3,756
  • NASDAQ Composite = 12,888
  • Russell 200 = 1,974

The year of 2021 looks poised for continued gains, and while some investors may cast their eyes on tech stocks, the real game-changers may be marijuana stocks due to the growing legalization efforts at state levels. On the horizon, it appears as if New York and Connecticut could be two of the next states to legalize recreational Marijuana, following closely on Virginia’s tail, which legalized this past election cycle.

To briefly summarize the status of New York and Connecticut:

  • Connecticut has lagged as bills regarding the subject never got called to the floor even though they made it out of committee. Comparatively, neighboring Massachusetts has had legal cannabis for years, and fellow tri state member (NY, CT, NJ) New Jersey has legalized it as well.  With the shutdown of the state, the issue was put on the backburner.
  • In New York, while efforts have proved unfruitful the past two years due to concerns over disproportionate effects of the “War on Drugs,” all this could change partially due to New Jersey’s efforts. If New York does not follow suit, it is a given that New Jersey would be “stealing” revenue from the neighboring states.

The reality remains that Marijuana is still illegal at the federal level, even with as large as the global market has grown and how strong investment opportunities are in the sector. By 2024, annual market values are expected to reach (or exceed) $30 billion.

With Joe Biden’s pledge to decriminalize Marijuana at the federal level, banking reforms for the industry will become a top agenda – with anticipated legislation allowing credit unions and banks to support the sector financially. Internationally, the United Nations removed cannabis and resin from its prior standing as a schedule four drug per the World Health Organization recommendation. For perspective, an example of another schedule four drug also includes heroin.

This vote could have sweeping effects on member nations, considering the United States and other countries voted “yes.” At the very minimum, we are likely to see an amendment to the STATES Act (Strengthening the Tenth Amendment Through Entrusting States) in the form of a more legitimate recognition of state programs for cannabis.

However, given that cannabis has been classified as an illegal substance for so long, there is still a bit of stigma in society. Marketers and public relation teams are aiming to limit This stigma through a variety of marketing strategies. However, the marketing efforts come with their own added complications, not the least of which are some of the regulatory constraints on marketing efforts.

With the likes of Curaleaf, Green Thumb Industries, Cresco Labs, and Trulieve Cannabis already doing exceptionally well in the sector, there is little question about the industry’s bright future. However, the reality is that not every company will have a shot at thriving within the industry. New entrants have a plethora of financial and legal barriers to overcome.

While there already exists a large gap between conglomerates and smaller-scale companies, this is only poised to grow – with some firms already beginning to fall to the wayside.

We will have to wait and see who the winners of 2021 are, but some of the early leaders are clear: Trulieve Cannabis is dominating the Florida market with 74 dispensaries and the goal to reach $1 billion in revenue. Curaleaf has already achieved more than 130 licenses in over 20 states in the United States, a feat driven partially by its acquisition of Cura Partners – a major West Coast player. Green Thumb Industries and Cresco Labs are following suit, so there are already clear winners emerging. Furthermore,

There is expected to be a shift to more strategic M&A with significant consolidation that has already begun regarding overall market trends. Beyond this, there is a great amount of desire for CPG (Consumer Packaged Good) companies to get involved in the market, but outside players will have to take a backseat while U.S. operators get the first crack at the market. Another exciting area will be the global market with the UN’s decision (outlined above) and the inevitable race to become the leading global exporter of cannabis.

Regardless of your opinion on the industry, it is almost indisputable that the marijuana market will realize significant breakthroughs in this year, fueled by enhanced banking reforms, increased legalization, push for profitability (of marijuana stocks, and recurring profitability for those who have already achieved this), and market shakeouts. There’s not doubt that emphatic winners and losers will emerge in 2021.

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