Welcome Back And Wilderness Stories

SPEAKER_02 0:10

Welcome everybody to this week in Cannabis Live. I am Jay Rosenthal from Cultivated. I'm here with my co-founder and our editor-in-chief, Jeremy Burke. We are joined by Mark Hauser from Cannabis Musing and Anna Ray Grabs team from High Spirits, a cannabis business podcast. She is back, what Mark called a walkabout in uh the Western US. You were on a 20-day paddle. What was it? It wasn't 20.

AnnaRae Grabstein 0:34

I wish it was a 20-day paddle. I went on a river and kayaking trip deep in the Idaho wilderness, um, the Frank Church wilderness, which is some of the most remote wilderness in the U.S. It was really awesome.

SPEAKER_02 0:47

It sounds remote. And and Mark, uh Jeremy, you were away. Mark, you're away. We were all away for some period of time. It's good to be back because there's cannabis news to talk about.

Curaleaf Makes A Hostile Offer

SPEAKER_02 0:59

Um and we're gonna start with a hostile takeover, a big company looking to take over another big company. Cure Leaf wants to take over Aurora Cannabis, uh, one of the OGs here in Canada. Jeremy, what is your sense of what's happening? Then we'll go around the horn.

SPEAKER_01 1:17

Um, sure, yeah. So just very quickly, um, CureLeaf launched a hostile bid for Aurora Cannabis. It boils down to about $4 per share, depending on where the share price is ticking. Um the deal is really about uh CureLeaf wants Aurora's EU GMP certified export assets. Um, you know, I spoke to Cure Leaf CEO uh Boris Jordan last week, uh, actually a number of times, uh, just about the deal and why it went hostile. Um, you know, and he was saying, look, like the European market, and this is also frankly how numbers work, but the European market is growing at 25 to 30 percent, the American market at 5 to 10 percent. Meanwhile, they are increasing their the European countries, Germany, Portugal are increasing the standards about what cannabis can enter, meaning the bar is high, and it's very difficult for American companies to meet that bar, um, even through licensing agreements. I mean, Cure Leaf wants control. And so, uh, you know, to Boris, um, his point was that Aurora has the right assets, they're in the wrong hands. I'll let shareholders determine that. Um, Aurora's been pretty quiet about commenting on this. Um, but it's a really interesting proxy fight, right? I mean, the deal makes a lot of sense for CureLeaf. Um, there is room for it to make a lot of sense for Aurora shareholders. At the same time, you know, there's a reason that this is hostile and that uh this MA did not happen behind the scenes. And so uh we shall see what happens.

SPEAKER_02 2:47

Although he did say to you, you're gonna quote me when I misquote him, but said he wanted it to be friendly.

SPEAKER_01 2:53

Uh I'm not, yeah, look, uh I've spoken to Boris a lot in the past. Um, you know, I I don't know if that uh was a quote that he wanted me to write or what he really meant. Um, but you know, he did speak to uh Miguel Martin, the CEO of Aurora, uh confirmed uh at least twice uh while this happened. Um uh, you know, so friendly, I don't know, but at least cordial, I think he wanted it to be. And now it's sort of exploded into the press. Um, it's become a big sort of public fight. And I would say it's no longer called cordial, excuse me, but um, you know, it can get back there, right? And so we'll see what happens.

SPEAKER_02 3:33

We'll see. Anna Ray, I know you've been following this, and obviously you have Mark as well. Anna Ray, to you, what are you what are some of your initial thoughts when you saw this sort of cross the tape?

The Real Value Of EU GMP

AnnaRae Grabstein 3:42

Um, I wasn't surprised because I have been hearing Boris talk about how even CuraLeaf, the largest cannabis company in the world, isn't yet big enough to get attention from large institutional investors. And so it seemed to be a bit of a hint when he was saying those things publicly months ago that there was going to be substantial growth ahead for CuraLif. And it makes sense why they would target Aurora because it definitely supports their international growth strategy. And they have a substantial distribution footprint available to them in Europe through acquisitions they've already made. And this EU GMP cultivation asset or assets that Aurora owns in Canada is really the way to quickly scale that opportunity that they have in Europe. And building EU GMP cultivation from the ground up is super time intensive and expensive. And uh it isn't just about dollars, it really is about the time that it takes to go through that certification process. So there is enormous value to existing EU GMP um being in place, which is what Aurora has. And uh not to mention that there's a massive divide between the actual market cap and the market value and the stock value that Aurora has been trading at, um, and the what I would call like the actual value of what these assets could do for cure release. And so I think it's an example of when stock values are so depressed and don't quite represent um like even replacement value of assets. Um brainer for cure release. I can understand why the Aurora team uh was not initially interested because they probably understand the the value of their assets and know that the stock price doesn't quite represent the way that they would value the company. Which of public cannabis CEOs will talk and say, well, stop looking at the stock price. It doesn't matter. And this is an example of uh why the stock price does matter, because you can be subject to a uh leveraged buyout if um if you're not here and you have really depressed stock values.

SPEAKER_03 6:11

Mark, it doesn't it doesn't help when the buyer's stock value is is similarly uh uh long term depressed. It doesn't make, you know, it doesn't for the for the Aurora shareholders, it doesn't necessarily make a for a an attractive, you know, it makes the bid also less. I mean, yeah, I mean the problem is is everybody's stock value is is depressed in this, is relatively depressed. Um there are a few that are probably trading well above where they should be, but most of them are trading well below, you know, where in theory they should be. Um I you know, I'm gonna I'm gonna play devil's advocate a little bit on what, you know, and on anyway, what you uh not what you said, but what you had heard um Boris say about um about institutional investors. I don't think it's I don't think it's the lack of of uh of Canadian assets that that is, you know, and the and the cure leaf being too small being the problem reason that institutional investors haven't invested in this industry any, you know, in the past couple of years. I mean, it's a three billion dollar market cap right now, and that's not nothing, it's not a penny stock. Um so you know, but but you know, that's still isn't that's just a sort of nitpick on that one statement. Um, I mean, you know, it does it does make a lot of sense. Um uh you know, it's it's funny to see a uh a deal where uh uh Cure Leaf starts talking about how they're gonna take over Aurora before they actually file a bid. Uh that was kind of funny to watch. You don't see that happen very often. Um and uh yeah, and you know, I read the circular yesterday, the you know, sort of the initial uh offer to purchase that's sort of the the that kicks it off formally. Um and you know, I mean, I I one of the unsurprising things, but notable, is that there's no statement in the circular set suggesting that CureLeaf is going to try to use Aurora's Nasdaq listing to get onto the NASDAQ. Um, you know, and so which isn't surprising because CureLeaf has, you know, it has is you know hasn't spun off its adult use, and so it can't list on the NASDAQ currently. So, so you know, any hopes and dreams of this being a backdoor uh you know Nasdaq listing are probably uh we just lost you. Oh, there you are. Uh our loss, you know, our are you know are dashed. So anyway.

SPEAKER_02 8:49

I I would say uh yes to everything you said, and interesting you brought up the NASDAQ listing, certainly for Aurora. There are a couple of things that are interesting. That's one Cam Batley, for those that have followed Aurora for long haul, was Aurora's sort of face, certainly to investors and retail investors over a long time. And he's sort of back talking about this. So if you're on Twitter, I would follow Cam Battley because he has some interesting insights about what is happening, uh, certainly from having a stake, I would imagine, in Aurora, but also how this is playing out in uh publicly. That's one thing, too. Um, well, maybe not this exact scenario. Uh, this is a scenario that can Canadian cannabis companies were talking about for a long time from their inception, and then continued, I would say, with Aurora doubling down on medical, uh, almost leaving the adult use market here in Canada, focused entirely on medical with their Canadian patients and their cultivation facilities here, but also with EU GMP in uh and distribution and facilities in Europe as well. So um I'm not saying it's the perfect takeover opportunity, but their assets were are there and really developed with strong uh patient base here in Canada, international uh operations as well. So I think there's something really interesting happening there. And then the third thing is that they're not the only company with assets that are sort of like Aurora. They may be the biggest, but there are others that have assets that are international, uh, that have facilities, GM, uh EU GMP facilities here in Canada, uh shipping around the world, not touching anything in adult use in the US. So there's some interesting other things, other companies that may be not on the market, but maybe targets as well, either from Curly for others. And we actually saw Tilray make some announcements about expanding their um EU GMP stuff uh over the past 24 hours, even. Um look at us. Yes, well, I think I think there's a little bit of look at us as well. Um announcements recently about expanding their product.

Europe Tightens Import Standards

AnnaRae Grabstein 10:44

Well, there's a lot of a tension around EU GMP because there has been some different pathways to be exporting or importing, excuse me, cannabis into Europe. And you didn't exactly need EU GMP the whole way through. There were different sorts of stations, G A C P that people were using, and then in some ways, I don't know what you'd call it, but kind of like greenwashing, but like GMP washing through through different processing layers and steps in the supply chain. Um, and that is being cracked down on. And so it's making it so that it is now more challenging to get cannabis into the EU without actual EU GMP, and it's certainly going to be getting um more strict as time goes on. There's more crackdowns happening.

SPEAKER_02 11:33

All of those things, yes. Oh, one other thing, Jeremy, that you didn't mention uh uh when you're talking about uh Boris Jordan talking about this deal, it's not only that um US markets are you know here um and EU markets are expanding, but also you the the the uh margins on EU market are much better because it's it's medical, right? So it's it is that is a strong factor that I see I did see him mention as well. Yeah on another platform that I won't give an applause.

SPEAKER_03 12:02

One other thing I'd add, I you know, this may be reading a little too much into it, um to to be fair to to what I'm about suggests, but is that uh you know, this also sends a a little bit of a signal that that that there isn't a ton of confidence that US exports are gonna happen anytime soon. Now, you know, I mean if you know if you could get the if you can get um you know the the buyout done in you know in in three the next three to six months, I mean that gives you a leg up in you know and lets you buy up assets that are already exporting. So, but but you know, if there was if there were an expectation that we would be able to, you know, that that there's a there is a strong expectation that medical schedule three was uh you know that was gonna survive the litigation challenges and we're gonna see DEA registrations pretty soon, you know, and the DEA sort of you know weed laundering process all set up pretty soon, and then you know, and then the DA is gonna next allow export, you know, like that. There are high strong confidence that that's coming down in the next couple months. You know, you probably wouldn't bother with buying and then and then you also have to get everything GMP certified. Um I think that's what that's the bigger we just don't have enough of that. So I think that you know, so uh to me it also says like you know, as much as everybody, you know, there's a few people are saying export is the next big thing, you know, it's you know, we're not there.

SPEAKER_01 13:40

Yeah, yeah. I think it's it's I mean what what Boris told me, he was, you know, frankly, like it's it's cheaper to buy than build, right? And so, you know, like even even with a hostile takeover and this proxy fight, you know, they would rather, to your point, Mark, do that as plan A and build as plan B than vice versa. Yeah.

AnnaRae Grabstein 14:00

And and conversion, which is almost a kind of a middle ground of because there is lots of existing cure leaf cultivation in the US, but converting that to EU GMP is is kind of ir irrational and doesn't work um as the problem. Uh can you give us some one minute?

SPEAKER_03 14:22

Anna, can you give us one minute on why it's why it doesn't make sense to convert to GMP?

AnnaRae Grabstein 14:29

Um it's just that there is an enormous amount of sanitation and infrastructure requirements that it would likely mean rebuilding existing facilities. And so it's just more complicated than it's worth. It's like remodeling um is is no fun. It's easier just to build build to suit from the

Rescheduling Briefs And DEA Admissions

AnnaRae Grabstein 14:53

beginning.

SPEAKER_02 14:53

Um okay, we're gonna shift gears because it's not the only news, Kiraleaf and Aurora's um friendly battle, I guess. I don't know what else we're gonna call it next week, but that's what we're gonna call it.

SPEAKER_01 15:03

Unfriendly battle.

SPEAKER_02 15:04

Unfriendly battle. Um I'm gonna start with I'm gonna start with this that uh a number of members of Congress sent a letter to the White House about rescheduling to find out what was happening, um, et cetera, et cetera, et cetera. This is just a letter from Congress. We used to call them not dear colleagues, but this is a letter, you know, four members of Congress sent to folks uh relatively uninteresting, to be quite honest, just trying to push the White House on it. But what is interesting, and this goes to uh much more uh cultivated centric, is in the briefing. Um if you uh if you really read it, so now the briefing is available to everybody, um, this is what is in the briefing that the um I don't know, hold on, let me just find it. Opposing parties briefed uh sent to uh following the hearing. Um let me just find page 101. And Jeremy, talk about it for a sec while I find it on the screen.

SPEAKER_01 15:56

Oh, sure. So uh in order to uh attempt to discredit uh one of the witnesses, uh Dr. Corey Birchman, who testified at the rescheduling hearing, uh he's a you know pain management specialist in New Hampshire, uh, you know, Smart Approaches to Marijuana, who is one of the main uh opposition groups towards rescheduling, uh, used our interview as a way to try and discredit this witness and say he was an industry plant, et cetera, et cetera. Um look, you know, if that's what the opposition is stooping to, they're, you know, in my view, grasping at straws completely. At the same time, right, um, you know, I do think that uh, you know, reading through the rescheduling briefings, like this is not a done deal uh by any means. Um and I thought even what was more astonishing uh was the DEA basically admitting that uh most cannabis users aren't a harm to themselves or to public health or to their communities more broadly. I mean, this is the DEA saying that point blank, uh, you know, which has perpetrated the war on drugs for five, six decades, I think. Uh, and so, you know, I thought that was pretty astonishing, right? Um, seeing those two pieces in the same document um is is quite startling. And at the same time, you know, uh, I'm happy that cultivated, regardless of how it's there, is inserted into the federal record. So, you know, thank you for reading us uh Smart Approaches to Marijuana.

SPEAKER_02 17:30

I I will say one thing before we get yelled at on Twitter that we got the document and just posted a document that Tom Angel at marijuana moment uh that's that was the one I just posted. He had this document before I get yelled at. Um, I just want to say uh so thank you, Tom, for the work that you do that on that and everything. Uh thank you for hosting that. And we just posted it on the show. Well, maybe we'll have him on Monday. He'd love it.

SPEAKER_01 17:53

Oh, and and Gary's commenting here.

SPEAKER_02 17:55

He's the quote, uh, Gary's quote was actually the full quote from the quote that he did with us. So thank you, Gary, for joining us to give us a rundown of the hearing, but also for writing that great quote, which now is inserted. I guess trying to be against anyway. You're it doesn't matter. Nonetheless, uh, thank you, Gary, for calling it a kangaroo court. Uh this kangaroo's on our side. I think it was the final quote. Um, but it was interesting, uh, sort of that that process and uh well certainly seeing cultivate's name. That video, it didn't get as many as you think like that would link to, but we it's it's over a thousand views on our um on our YouTube channel right now, uh that specific

The Chaos Of Medical-Only Reform

SPEAKER_02 18:34

clip.

AnnaRae Grabstein 18:34

Um so if the DEA is supportive and acknowledges that cannabis has medical uses and doesn't harm people, what the heck is the New York Times talking about?

SPEAKER_02 18:47

Well, good question. You're you're trumping you're trumping there. Can I just say one thing, Anna Ray, on that exact thing? And this has come up while you're on vacation. Um uh I I am uh I'm a pessimist on what is about to happen or what may happen and on what timeline. My pessimism is that I think they're gonna try to split uh Mark, there's there's a legal term for this, like split the baby from the bathwater or something and make it medical only.

SPEAKER_01 19:14

That is that's a legal term, Jay. Yeah. Yeah, keeping the baby from the bathwater.

SPEAKER_02 19:19

I'm like mixing metaphors, I know, but like it like I think there is a path where they could keep it medical only on schedule three. The states are the state adult use programs are schedule one, which I think Mark, you've described as would be, I don't know, chaos or difficult. Funniest outcome. What's that?

SPEAKER_03 19:35

The funniest outcome, but for sure.

AnnaRae Grabstein 19:37

I mean, there's there's a lot of people that are having a lot of opinions about what might happen. I talked to Jason Adelstone this week. He's a lawyer out of Colorado that works on a lot of international treaty stuff. And um, he also has a lot of pessimism about this process. He thinks that the um that the executive order will not stand, and that anything that will stand will be what comes out of this ALJ process, um, which would then put the DEA in an awkward position because the work that the DEA has done on registration so far has to do with what was in the executive order. And so his opinion is that those then that whole registration process would get pulled back and um and it wouldn't exist in this ALJ version of Schedule Three. I don't know what to call it. Um so there's there's there's a lot going on here. I I don't know.

SPEAKER_03 20:39

Yeah. And then what would happen to the New York Stock Exchange listings? Right. Yeah.

SPEAKER_01 20:46

Yeah. Yeah. Um I mean, one one point, what just one large point to make there, and then we can move on to the New York Times if you guys want to talk about that. Um, you know, this letter, uh Jay, that you mentioned earlier from representatives to the federal government about what to do about rescheduling, uh, it's the same thing I hear from all of the state regulatory offices. Like there is no guidance from the federal government. Um, and there just seems to be uh very little thinking about the second-order effects of what happens if cannabis is rescheduled or if it's not, right? There's so many financial implications, there's implications for the market regulators, there's implications for every state legal cannabis policy for hemp derived THC. Um, you know, there needs to be some thinking through what this means and guidance from the federal government. Either way, it happens, because, you know, like a lot of cannabis policymaking, um, look, it's was politically expedient for Trump. Uh, you know, they did it in the most confusing and arguably Byzantine way possible. Uh, and so, you know, it it it creates a more chaos than there needs to be with what could actually be uh I don't I'm not relatively simple, but a much smoother and easier. legal pathway to cannabis reform than this.

unknown 22:04

Yeah.

AnnaRae Grabstein 22:05

Creating like a holistic solution to the market. Wow, what an idea. As opposed to just doing these small incremental things that just create complications, huh?

SPEAKER_01 22:15

Yeah.

AnnaRae Grabstein 22:15

What a what a concept.

SPEAKER_01 22:17

Exactly. Or or or if you're going to create complications, I mean think through, you know, what happens next. Uh you know, that's that's um uh you know we we have we have federal leaders who aren't super good at thinking through what happens next based on the Iran war and other things, but you know I'll I'll digress there.

AnnaRae Grabstein 22:34

The regulators in the state markets are definitely watching and waiting. And you've heard from multiple state regulators that they are ready and willing to be there for their state operators to figure out how to support them if this opens up opportunity, but they can't rush to be making changes to their own regulatory infrastructure because it's just completely unclear what that needs to be. And if they need to change their track and trace in some certain way or whatever it is, I think that what I'm hearing is that they're down to do it, but they don't seem to know any more than we do. Right.

SPEAKER_02 23:12

That's yeah yeah well I mean it's not it's not the only issue that the federal government or the White House and this or the administration is not talking to states that are generally democratic. This is one of many many many issues where there's no clarity from the federal government what's happening in states that generally vote democratic.

Winners And Losers For The Week

SPEAKER_02 23:29

And with that we're going to transition to everybody's favorite segment on the show. That's our intro to winners and losers who wants to go first raise your hands Jeremy you're up first.

SPEAKER_01 23:49

New York Times is my loser if anyone has read the newsletter this morning they have had I think a consistent pattern now I want to say about three to four stories of the last five or six months that take a very in my view negative and slanted view towards I guess what you could broadly say are the public health impacts of cannabis legalization. So look it's it's disappointing to see it from the paper of record you know it's calls into question how they view other topics and why their editorial process is breaking down a little bit. But look I do you know having worked in mainstream media for a long time and having a lot of friends who work in mainstream media like I I still do think that the frame that you know cannabis legalization is driven by corporate interests who want to addict people to these high potency drugs like that's that's a catnip for journalists and journalism in general um exposing corporate malfeasance is like the north star of any you know media company and and so I think you know it's going to be very hard to uh uh disavow reporters of that notion I mean we've seen books be written about that um articles be written about it and I do think it is you know somewhat of a consequence of the industry leading reform efforts and and sort of sucking up the oxygen from advocates it creates a very easy boogeyman uh and you know the times is leading into that um but look like we can refute with statistics and evidence all we want some of the claims in those stories at the same time that narrative is not going away and the industry does need to consider that very carefully especially right now with rescheduling still up in the air.

SPEAKER_02 25:47

That's your loser do you have a winner? Uh no happened it's such a negative way to end the week Jeremy button.

SPEAKER_01 25:57

Yeah I thought very carefully about it.

AnnaRae Grabstein 25:59

Whatever whichever shareholder base emerges uh from the Cure Leaferara fight is gonna be my winner so TV determined Anna Ray um I'm gonna talk about a winner that is people that are into data and cannabis right now I think are at this like incredible inflection point because so many of the different cannabis technology tools that people are using are now hooking into AI using Cloud MCPs. And MCP stands for model context protocol and it's basically like a pipe like a USB pipe of your data from an existing like POS or data platform into cloud to be able to analyze it. And I am seeing a massive transition with businesses to starting to become more data focused because they are able to actualize their data and use it in ways that they never could before. I've been testing out the BDSA MCP and it's just incredible how it can take cultivated news mixed with the data, mixed with something else and like shoot out a whole bunch of insights in ways that it wasn't that I couldn't have done that myself, but it would have taken me hours of pivot tables and different spreadsheets and then you can just now do it in minutes. So there is this um massive availability to data insights that we have never had before with all of the existing platforms and tools and um I think it's just going to be ramping up but it's starting to get really hot and heavy right now. So the winners are the data users and people that love that stuff.

SPEAKER_02 27:38

And the loser in this case is is Excel pivot tables.

SPEAKER_03 27:41

Yes in this case the loser's the non-cultivated readers let's say that always those all losers you can be a winner if you sign up for our list not cultivated dot news mark winners loser um I one loser is um is is our industry for once again sort of uh I picking up on the clickbait of this story earlier this week that um that marijuana could generate you know 58 billion or 75 billion of sorry 58 billion of tax revenue over the next 10 years um if you know if all the states legalized where you know the federal government's revenue annually is five trillion um you know it it's I you know it's not Trump change but I think it's just we continue to delude ourselves that you know that that the federal government is going to care about the economics of cannabis as a reason to to legalize it. You know we've always sort of had you know that that's always been this thing of like oh it's so many jobs and all that nobody nobody cares it's drugs and you know and that's not saying we're never going to see legalization but it the economics of it are not the reason why we're gonna ever see legalization. So we just got to you know we continue to kid ourselves and just sort of a cautionary tale of of of it's it's interesting information don't get me wrong but that's you know don't like make more out of it than it is.

SPEAKER_02 29:17

Fair enough I have a loser and a winner. My loser only because I'm gonna frame a lot this is a UMass poll about the uh repeal measure on the ballot uh would definitely vote no so that is the pro-cannabis industry side I guess uh is 40% and the definitely would vote yes is 15% so the no's are winning by a lot in this case not that a campaign doesn't need to be run not that this isn't a threat to the industry that there's a repeal measure on a ballot in a mature market but people are not turned off by legalization in Massachusetts and as Jeremy pointed out in our Slack channel it's roughly the same amount of votes that it got to actually pass. So it doesn't even look like a lot of people have shifted gears on this uh over the past several years in Massachusetts so my losers are the folks pushing this initiative in Massachusetts and hopefully the winners in this will be uh the no vote which is confusing always in politics but I have another winner and this leads into next week's show. My other winner this week or a winner this week is Rachel Bell who works at Gotham she is uh sort of their social media person she has a show called High I'm high where she gets high and travels around New York and goes to uh different events and uh locations and museums and such and this is in the New Yorker so no that's pretty significant and she's also amazing and I say this she's my winner of the week uh because she is so cool. And she's gonna be on this

Next Week Guest And Sign-Off

SPEAKER_02 30:40

show next week. So it's like a it's a winner plus a lead into next week. We'll sit down with Rachel Bell uh in New York which she's called the curator of high art uh by the New Yorker. That's a pretty good title. So she will be with us next week. She couldn't be with us this week because I don't think she's on a river in Idaho but she's certainly uh taking a day or two off so that's my winner of the week. Um and that's next week Friday August 28th at noon Eastern and that's the show for this week everybody pretty good it's a lot it's a big week for everybody. We appreciate everybody joining us on LinkedIn and YouTube or listening to this on whatever podcast platform you've got. Welcome back Anna Ray, Jeremy Mark we'll see everybody next week thanks everybody