Cannabis Musings - November 13, 2024

Something of an answer on GTI x Agrify, and maybe the new AG

Friends, first as a follow-up, we got a partial answer to our question last week about why Green Thumb pretty much took over Agrify Corp. in all but name.  Agrify announced on Tuesday that it will be acquiring a hemp-derived THC beverage maker for 530,000 Agrify shares.  Agrify closed at $4.83/share before that deal got announced, so call that about a $2.6 million deal to bring a so-called “intoxicating hemp” beverage company to the Nasdaq. 

Remember that the 2023 2024 2025 Farm Bill could decide the fate of hemp-derived THC.  The entire product category could go plotz, or the loophole could survive and continue to eat non-hemp cannabis’ kasha varnishkes.  (There is some academic chatter about some sort of middle ground, but I’m skeptical that gets done, particularly because that would likely involve the FDA, which recently reminded us that it doesn’t like the product.) 

So, on the one hand, it seems curious to me to invest money in a business that you know has a real risk of being eliminated within the next 12 months (even when I worked on taking the Tribune Company private in 2007, we didn’t know the financial crisis + the internet would nearly ruin the advertising industry about a year later).  On the other hand, perhaps GTI figures that it’s not an expensive ($10mm invested into Agrify, plus a bunch of stock to acquire the hemp assets) 50/50 bet (those aren’t real odds – just more reflective of the fact that there’s so little public information about the direction of the issue in the Farm Bill).  If they’re wrong, it’s a writeoff.  If they’re right, they have a public vehicle to raise capital to build a hemp drinks business.

Oh, and did I mention that they announced this deal based on a non-binding letter of intent?

Oy vey, this industry is weird.

Second, just a quick reaction to the announcement that President-elect Trump has picked Representative Matt Gaetz (R-Florida) as his nominee for U.S. Attorney General.  Assuming he passes the Senate’s vote, what would that mean for cannabis?  I mean, who knows anymore.  Really.  This is where scapulimancy comes in handy, because that’s more likely to generate an accurate prediction than I can at this point. 

There’s reporting that Gaetz is pro-cannabis, and certainly stock traders liked the news (but again, I’ll tap the sign - price discovery in cannabis stocks is fundamentally broken).  And yeah, the Drug Enforcement Administration is an agency under the Department of Justice, which is run by the Attorney General.  That doesn’t sound too bad for the rescheduling process, maybe.  But the AG doesn’t vote in Congress for things like SAFER, let alone legalization (remember my position that the chances of the federal government descheduling cannabis without erecting an entire regulatory, licensing, and taxation framework are infinitesimally small). 

So maybe it’d be good for the industry?  Maybe not?  Zol ich azoy vissen fun tsores! (“I haven’t the faintest idea!” (lit. “I should know as little about trouble as I know about this!”))

Be seeing you.

© 2024 Marc Hauser.  None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form.  The foregoing represents my own views and not those of Jardín.