Gallows humor was the common motif of speakers on the opening sessions of the 12th annual MJBiz Conference in Las Vegas Nov. 28 & 29. Pained laughter was the usual response from attendees.
The brief ebullience that buoyed the battered industry in August when the Department of Health & Human Services recommended that the Drug Enforcement Administration reschedule “marijuana” has turned out to have a flipside: investors seem to have decided they will just wait and see what the DEA does before they put any more capital to work in cannabis.
Hence “Financing” was the immediate and resounding answer to the question “What do you see as the biggest challenge for the industry?” from panelists on “The Road Ahead: 18 Months to the Future of Cannabis” at the Nov. 28 Finance Forum. The three MJBiz journalists that delivered “State of the Industry” opening session on Nov. 29 provided data to back it up.
Cannabis companies raised $11.3 billion in 2018 as both California and Canada legalized, according to Viridian Capital Advisors. That plummeted to $3.6 billion in 2020 as investors realized long-time drug warrior Joe Biden would be no friend to the industry. Investment recovered to $11.1 billion in 2021 but dropped to $4 billion in 2022. It’s on track to fall short of $2 billion this year, a level last seen in 2016.
Typical of the dark mood, MJBiz Daily political reporter Chris Roberts had to go three slides deep to get to all the bad news he needed to cover, everything from the collapse of major California wholesaler HERBL to OSHA finding that asbestos exposure caused the death of a Massachusetts cultivation worker.
But eventually the optimism inherent in a start-up industry full of true believers in their product emerged: Roberts suggested that the DEA is “constitutionally” bound to go with the HHS recommendation to reschedule, “it’s just a matter of when.”
That would immediately turn some unprofitable companies profitable. It would also bring many investors waiting on the sidelines enthusiastically into the business, and of course profitable companies will command much better terms than those still burning cash.
And the news at the retail counter is not uniformly bad: the opening session also saw estimates of state level revenue changes in 2023 that ranged from -13% in Colorado and -10% in California to +13% in Arizona and a whopping +33% in Michigan.
Per Roberts’ colleague Chris Casacchia, “Michiganders love their weed,” a basic fact about a significant piece of the consumer base in most of the world that keeps the industry inherently optimistic in even these dark days.