US cannabis is moving ‘relatively modestly’, says Tilray CEO

Cannabis companies have been eyeing the United States for years and Tilray has made inroads into the market with its acquisitions of SweetWater Brewing Company and Breckenridge Distillery. (Photo: 123RF)

The chief executive of Tilray Brands has tempered expectations a day after US President Joe Biden revealed he would pardon those convicted under federal law of cannabis possession and review the status of marijuana as a substance of appendix 1.

“It’s important to recognize these initiatives for what they are: relatively small, but any sign of progress is important right now,” Irwin Simon said in a Friday call with analysts.

President Biden’s surprise announcement on Thursday had Canada’s cannabis industry buzzing because he had long hoped the United States would move toward easing regulations and legalizing the substance nationwide.

The product is legal for medical use in approximately 39 states and for recreational use in 19, including the federal capital. However, federal law still considers it a Schedule I controlled substance with a high risk of abuse and no accepted medical use, placing it in a group with hard drugs like heroin, LSD, and peyote.

Canadian and US company prices rallied on the news, jumping 20-30% in many cases. Tilray’s share price jumped nearly 33% to $5.37, while rival Canopy Growth Corp. gained 23% to $5.16 late Thursday.

Tilray’s share price fell nearly 11% to $4.78 in morning trading Friday, while Canopy’s fell about 13% to $4.49.

Cannabis companies have been eyeing the United States for years and Tilray has made inroads into the market with its acquisitions of SweetWater Brewing Company and Breckenridge Distillery.

The company also purchased enough of MedMen Enterprises’ convertible debt to make it a minority stake upon legalization in the United States.

“From an American perspective, what we’re going to be doing all the time is looking at acquisitions in the cannabis-like consumption space,” Simon said. We have a good balance sheet, we have good brands, we have a lot of knowledge in this industry, and being one of the biggest gives us opportunistic ways to go about it.”

However, any US initiative could be hampered, as the country has yet to pass the SAFE Banking Act. Passage of the law would provide a safe haven for financial institutions such as banks and insurance companies, which provide services to cannabis businesses.

Analysts appeared divided on whether Mr Biden’s moves on Thursday would give the law a boost.

Jaret Seiberg, an analyst with the Cowen Washington Research Group, lowered expectations that the law would pass to 60% and said he feared the moves could derail the SAFE Banking Act.

“At least it suggests a narrow bill that only applies to banking and insurance is the most likely,” he said in a note to investors Thursday. This is because the president has already implemented social justice reforms.”

Others felt the opposite.

“Our cannabis lobbyist views this development as bullish for the SAFE Banking Act during this lame duck session,” BMO Capital Markets’ Tamy Chen wrote in a note to investors Friday. He thinks President Biden’s mass delisting could provide Senators Schumer and Booker with enough political cover to finally back SAFE.”

In April, the House of Representatives passed Rep. Jerry Nadler’s Marijuana Opportunity Reinvestment and Expungement Act, which would effectively remove cannabis from the US list of controlled substances.

Senate Majority Leader Chuck Schumer simultaneously introduced a comprehensive decriminalization bill, the Cannabis Administration and Opportunity Act.

The discussion on the U.S. outlook came as Tilray reported a net loss of US$65.8 million in the first quarter, compared to a net loss of US$34.6 million in the same period last year.

Its basic and diluted net loss for the period ended August 31 was 13 US cents per share, compared with a net loss of 8 US cents per share a year earlier.

Revenue for the three months ended August 31 was US$153.2 million, compared to US$168.0 million in 2021.

Revenue was ‘cut’ by about US$2.5 million due to a cyberattack that affected the Ontario distributor and a strike that halted deliveries in British Columbia in August, it said. Blair MacNeil, president of Canadian operations for Tilray.

Cannabis revenues in Canada, which totaled $58.6 million versus $70.5 million a year ago, would have been 6% higher had the company not faced one or more other disruptions, he added.

“Although the provincial boards did not open additional delivery windows to compensate for the shortfall, they increased order sizes soon after to compensate for demand,” Chief Financial Officer Carl Merton said during the meeting. same call.

“Due to the fact that the end of our quarter is so close to these impacts, we have not been able to recover the loss of revenue this quarter, but we expect to recover it in the next quarter,” he said. he concluded.

With information from James McCarten in Washington

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US cannabis is moving ‘relatively modestly’, says Tilray CEO