This transcript has been auto-generated and may contain technological errors.
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[Applause]
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welcome I’m your host Hilary Bricken and
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this is the Cannabis law Now podcast
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where we regularly discuss issues
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related to the Cannabis industry
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including investment day-to-day
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operational issues and potential reform
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on the horizon that will impact all
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cannabis businesses and investors in the
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United
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States hey everybody Welcome to the
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power podcast today I have a super
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fascinating guest she is my first what I
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would call institutional cannabis
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investor on the podcast and so far my
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first female participant which I’m very
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excited about she’s going to bring I
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think an improved perspective to the
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conversation based on her many many
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years of experience in the Cannabis
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industry today we have Emily Paxhia who
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is the co-founder and managing partner
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of Poseidon Investment Management
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welcome Emily thank you so much Hilary
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thank you for having me here today yes I
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feel like I’m in the presence of you
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know some some deity Godlike person
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because you’re still here uh and I say
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that a little bit tongue and cheek but
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it looks like and you know we’re going
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to talk about this but the fund your
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funds and your investment Finance
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presence you have been around for a
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decade plus which in cannabis cannabis
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years are like dog years in my opinion
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right you’ve probably heard that before
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that makes you about a thousand years
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old in this
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industry we are dinosaurs for cannabis
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investing for sure we have seen a few
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turns in this cycle of this emerging
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market for sure yeah I can imagine so
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let’s jump right into it were you and
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Poseidon maybe the first cannabis fund
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ever on the map yeah for a long time and
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you will appreciate this our lawyers
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were saying you can’t say that but now
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they’re kind of like actually we think
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you can say that you know there were
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other companies that were investing or
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allocating into the industry but the way
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they were doing it was a a different I
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would say a different structure and so
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from a kind of a diversified fund
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actively managed institutional
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perspective I think we were probably the
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first to actually do it and you know
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back to the legal fears because when I
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jumped in in 2010 it was unheard of that
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corporate attorneys transactional
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lawyers would participate it was not a
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thing and I was back in Washington state
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right which predates legalization and
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really getting its regulatory act
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together you don’t have to invade the
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attorney Cent privilege but generally
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were your lawyers telling you you know
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you could go to prison for doing this I
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mean what what was the General kind of
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attitude then yeah you know we’re ba
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we’re based out of San Francisco and I
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think there’s a little bit of a
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pioneering mindset in San Francisco
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where it’s you know been the Gold Rush
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the tech era was born here truly I mean
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between here and Seattle really and I
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think that pioner mindset came in very
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handy for us when it came to sourcing
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our legal support and you know I’ll give
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him credit Bart M melon stood right by
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us and together a lot of funds and and
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tends to be a forward-looking person he
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does a lot of kind of emerging sector
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things he was also early in crypto
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helping crypto funds form and I think he
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just saw that but I mean I tell
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everybody every day I just read my own
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PPM LPA and uh it gets me a little
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sweaty around the collar when I look at
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some of the risks I’ve taken on over the
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years to be the manager of this and you
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know when Morgan and Morgan’s my brother
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and business partner when we were
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putting this together truly did want to
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put together the infrastructure to be an
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Institutional investment firm in
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cannabis we launched with one fund but
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we always had aspirations to have more
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products and opportunities to allocate
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Capital into the sector and when we did
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it we over 20 you know 2012 is when we
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really started to put this all together
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first day of trading was January 2014
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when Colorado opened actually delayed
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launching the fund through 2013 to do
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that so we would hit the timing on that
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right it’s all about timing but he and I
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we really did like the exercise of
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looking at the worst case scenario of
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how this could go being allocators of
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capital into a schedule one product that
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was only technically kind of medically
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legal but not really from a business
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standpoint in a few markets and then you
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know adult use opening in Colorado Then
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followed by Washington and Alaska of all
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markets but it was a real risk that we
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looked at and just another interesting
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piece on that is that our very first
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investor was a lawyer and I always say
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the reason and actually followed by a
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few other lawyers and I always say there
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was this Delta between perceived versus
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actual risk and I think that they saw
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that as the opportunity to get it and
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they’ve done really well with us over
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the years so I’ll never forget them your
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foresight is outstanding I think to
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approach the industry in this capacity
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how in the early days I know you
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mentioned the attorneys who I think
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would intimately
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understand actual versus perceived risk
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grade degrees how were you able to get
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other investment with something so
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legally precarious because I know when I
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would talk to people they would either
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be Allin guns of Blazing Woody harelson
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natural board Killers or going to that
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or they wanted nothing to do with it for
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us we realized we had to be an
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educational platform and an
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informational platform as well as
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investors and it’s you know one of the
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things when you really want to become an
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expert or completely immersed in a
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category is to digest it and then to
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educate other people about it because
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then you know it inside and out and so
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we just became a source of information
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we also incredibly we leaned in
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incredibly close on the policy side so
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the first thing we did was we joined the
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ncia and then right after that we joined
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the marijuana policy project we joined
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the ccia I mean we have been involved in
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every possible way to support the reform
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that would be coming from a legal
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standpoint on the industry and I was on
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the board of the marijuana policy
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project for a period of time which was
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incredibly educational experience for me
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because I didn’t come from a background
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of politics but I will I’m a voracious a
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student and will learn whatever I can
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get my take whatever I can get my hands
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on and at the time the marijuana policy
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project was actually not a business
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organization they were focused on
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changing laws around cannabis from a
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criminal justice standpoint but you know
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Morgan my my brother always says my my
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baby brother who’s quite wise and I call
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him the little buddha but he was Bor
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with a calculator in his hand by the way
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but he always says capital is a change
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agent and I think that’s the absolute
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truth and so if you wanted to be a part
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of the change you had to lean in on it
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but I think that gave our investors who
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would end up joining us Comfort because
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they knew we were so actively engaged
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and involved and very clear on the risks
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and the opportunities that existed based
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on how laws were changing and the
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perception of lawmakers around cannabis
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so we hit the timing pretty well because
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the full memo there’s three versions of
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the memo but the first and second
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happened very quickly within the time
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that we were launching the fund I think
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the first was in August right before we
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launched and then the second one I think
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came out in like February or March right
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after we launched so good things were
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happening that were showing
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directionally positive Evolution around
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cannabis and the perception of cannabis
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as a legal market right and those were
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in my opinion those were good times when
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the doj was willing to show the
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enforcement hand and brought some sanity
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to the madness that is the state federal
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conflict and we kind of have not seen
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that since and and on the back of that I
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really want to know because I feel like
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similar to me you’ve probably seen it
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all because you’ve been around for years
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what have you seen as a seasoned
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investor as a corporate advisor evolve
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and change in the last decade plus well
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I think a lot of folks are very very
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much hung up on this a couple of
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catalysts I break Catalyst down actually
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into two things I view there are
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catalysts that actually drive growth and
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fundamental improvements in these
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businesses and I would say those are new
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states opening those are you know more
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and sophisticated and better service
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providers coming in to support the
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industry you know like better law firms
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over time better insurance providers tax
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audit all of those things that improve
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the fundamentals and the governance of
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these businesses as this industry
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matures so those are those are different
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kind of business fundamental catalysts
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and then there’s these exogenous
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catalysts that I think are The
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Gatekeepers of Capital flowing into the
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industry and those would be things like
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the safe Banking Act you know scheduling
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of cannabis these various things at the
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federal and legal cases working through
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the judicial judicial process so I think
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those are different things but I don’t
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think we should overlook the amount of
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change that has occurred over the last
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10 plus years where now over half of the
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United States live in a state where they
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have legal access to cannabis we have a
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cannabis native generation of genz
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that’s entering the workforce with share
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of wallet and when I talk about things
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it’s always 21 plus I just want to set
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that is we never are talking about
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unless it’s a medical situation where
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cannabis is a medical platform for
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someone with like epilepsy or something
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like that I’m talking about recreational
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it’s always adult use above 21 plus I
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always just like to set that standard
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for anyone listening there are folks
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entering the workforce with a share of
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wallet they can allocate to cannabis
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over alcohol and we know this is a
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generational Trend that’s shifting in
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our society and I think that the
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confluence of that with also what’s
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going on with the potential of federal
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reform plus new States opening and the
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Gallup poll results just came out
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yesterday or recently and we’re at 70
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70% approval rating to legalize cannabis
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at across the United States I mean I
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make the joke that we can’t all even get
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aligned on our pop stars or or Taylor
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Swift for God’s sakes like fluffy things
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like that but we can get aligned on one
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thing and that is cannabis legalization
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so I don’t think this means cannibal
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cannabis legalization is coming
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overnight but I hope that these
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politicians in this election cycle are
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taking a look at how their constituents
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are are leveling up on this on this
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particular issue so those are a lot of
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the things that I’ve seen change I’ve
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also seen an arc of a business change in
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our industry when we first started
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investing in this industry some of our
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investments were in Canada and like a
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metric that was thrown around then was
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on funded capacity which we always were
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nervous about that metric which is
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essentially saying like how built out is
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their capacity to cultivate cannabis to
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distribute through the infrastru
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structure of the legal market and I
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would say there was not a lot of good
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shepherding of capital at that time it
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was very hype driven it wasn’t really
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based on how the shape of these
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businesses would actually fast forward
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to today where we have not had Capital
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flowing into the industry and actually
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for anyone who’s kind of newer to this
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or hasn’t P paying attention to it you
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can see where the stock started to sell
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off in was February 2021 when the Aros
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event happened with credit Swiss which
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00:10:55,560 –> 00:11:01,560
no long rip credit swiss but you know we
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lost a lot of custody for as for stocks
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in the industry and so we lost a lot of
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institutional capital and without the
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size and Long View of institutional
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capital on a sector the the industry has
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been very under capitalized and it’s
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gone from there too I mean then you know
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all of the things happened uh since then
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with the failure of Reform at the
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federal level around perfunctory banking
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legislation things like that none of
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this means that the businesses of
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cannabis aren’t continuing to be
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interesting and so where we today and
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what we’ve seen this amazing Arc come
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00:11:31,800 –> 00:11:34,920
out to is that we really do have a
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better understanding of these businesses
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we know what to look for in terms of
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sgna containment gross margin
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percentages Eva do profiles and you can
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really examine these businesses and have
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stronger and clearer expectations of
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what a good business should look like in
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cannabis and then alongside of that all
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of the ancillary technology platforms
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have just grown and grown and grown and
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there’s just amazing Evolutions in those
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Technology Solutions and also in the
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data that those companies are capturing
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around consumers of cannabis and what
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are some of the sectors in cannabis or
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the companies in cannabis that Poseidon
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had faith in so much so that it invested
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I know it’s fairly diverse because
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Poseidon’s information on its website is
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pretty candid um about Investments over
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the years so can you share that with us
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so we were early in h Canada when the
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cannabis companies up there experienced
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massive valuation growth we took our
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returns off the table and did very very
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well and rotated our Capital into the
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United States and we were investors
349
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early in companies like GTI when they
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had 30 people at the table and so from
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there and I mean the phrase the acronym
352
00:12:39,920 –> 00:12:44,959
MSO did not exist at that time now we
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00:12:43,000 –> 00:12:46,320
all know what a multi-state operator is
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yeah you know we were investing in
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Canada before people called them LPS or
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licensed producers so it’s like you know
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00:12:50,199 –> 00:12:54,000
you’re kind of investing in the actual
358
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business before it becomes like this
359
00:12:54,000 –> 00:12:59,480
popular concept but what we like in the
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US are focusing on markets where there
361
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is clear regulation legal versus elicit
362
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operations we like full vertical we were
363
00:13:06,240 –> 00:13:09,959
very interested in kind of looking and
364
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by the way it’s not how we thought we
365
00:13:09,959 –> 00:13:14,760
would want to invest but we’ve seen how
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it plays out where if you’re just in the
367
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cultivation you can be susceptible to
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certain Market issues or regulatory
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shifts even versus what goes on on the
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00:13:21,800 –> 00:13:24,680
full vertical same thing if we are in
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the middle of the supply chain on
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manufacturing so we’ve seen how
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regulation and enforcement can actually
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impct
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disproportionately those aspects of the
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vertical so now we kind of like the full
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vertical or we really just like retail
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and so that’s kind of where we’ve
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evolved to although we’ve invested
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across all of those things pure
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cultivation pure manufacturing and
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distribution pure retail done very very
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little in pure Brands and it’s because
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being someone who came from a background
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of research and Consulting on consumer
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00:13:52,399 –> 00:13:57,600
products for companies like PepsiCo I
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know how difficult building a brand is
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and then maintaining Market share on a
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brand is so I had just enough
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information to scare me enough that we
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00:14:03,360 –> 00:14:07,440
avoided a lot of the frothy investing
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into Brands and have focused more on the
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00:14:07,440 –> 00:14:11,279
verticals so we like the verticals we
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like the states where they enforce legal
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programs we’re still actually in
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California because I’m still a big
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00:14:14,680 –> 00:14:19,160
believer this is like the tip of the
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00:14:16,240 –> 00:14:21,040
spere of what a mature Market with great
399
00:14:19,160 –> 00:14:22,920
Brands and products can look like even
400
00:14:21,040 –> 00:14:25,440
if it’s incredibly hard and I do think
401
00:14:22,920 –> 00:14:27,880
the state has could be doing a better
402
00:14:25,440 –> 00:14:29,600
job to get more things open and to help
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00:14:27,880 –> 00:14:32,000
consumers have more access and maybe
404
00:14:29,600 –> 00:14:34,480
rethink the way the taxes are done here
405
00:14:32,000 –> 00:14:36,519
but nonetheless it’s kind of like I have
406
00:14:34,480 –> 00:14:38,079
Associated it with an athlete training
407
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at altitude if you can make it in
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00:14:38,079 –> 00:14:41,560
California I think you can make it and
409
00:14:39,959 –> 00:14:43,639
if you can run a marathon at altitude
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00:14:41,560 –> 00:14:45,880
you can run a marathon at sea level with
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00:14:43,639 –> 00:14:47,639
your you know eyes Clos so I think
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anybody who does well in California
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00:14:47,639 –> 00:14:51,680
could be like a a leader and have to do
414
00:14:49,680 –> 00:14:53,880
well in other markets we like that on
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00:14:51,680 –> 00:14:55,920
the technology side we have done things
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00:14:53,880 –> 00:14:58,440
on the retail optimization and point of
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00:14:55,920 –> 00:15:00,680
sale which we love and those Investments
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00:14:58,440 –> 00:15:02,880
have gone pretty well and then we love
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the data side of it because of
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00:15:02,880 –> 00:15:06,639
everything I’m talking about here I mean
421
00:15:04,440 –> 00:15:08,320
this is at the end of the day a consumer
422
00:15:06,639 –> 00:15:11,560
product at the end of the day it’s
423
00:15:08,320 –> 00:15:14,079
eating into the bevel category AAL base
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but it’s coming and so the value of that
425
00:15:14,079 –> 00:15:18,560
data and the consumer trending around
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00:15:16,480 –> 00:15:21,320
health and wellness through to just pure
427
00:15:18,560 –> 00:15:23,320
consumer lifestyle stuff in cannabis is
428
00:15:21,320 –> 00:15:25,079
going to be valuable and interesting to
429
00:15:23,320 –> 00:15:27,079
people when they finally start to come
430
00:15:25,079 –> 00:15:29,319
into the sector yeah I think that’s
431
00:15:27,079 –> 00:15:32,120
right now a little bit about these past
432
00:15:29,319 –> 00:15:34,639
Investments can you give us maybe the
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00:15:32,120 –> 00:15:37,160
makeup of your top most successful
434
00:15:34,639 –> 00:15:39,959
investment and then I got to ask it
435
00:15:37,160 –> 00:15:41,800
maybe the profile of the worst meaning
436
00:15:39,959 –> 00:15:43,560
what elements made up your most
437
00:15:41,800 –> 00:15:45,519
successful investment and I know that’s
438
00:15:43,560 –> 00:15:47,240
very Broad and then same question for
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00:15:45,519 –> 00:15:49,360
maybe one that gave you a little
440
00:15:47,240 –> 00:15:51,480
heartburn I I would say we’ve done
441
00:15:49,360 –> 00:15:52,959
incredibly well in a number of things
442
00:15:51,480 –> 00:15:55,759
like for example we were early in
443
00:15:52,959 –> 00:15:57,360
private in afria which those new to the
444
00:15:55,759 –> 00:15:59,920
sector wouldn’t even know who that is
445
00:15:57,360 –> 00:16:02,240
anymore because afria is now till R
446
00:15:59,920 –> 00:16:04,000
which waser I mean it’s like there’s so
447
00:16:02,240 –> 00:16:05,720
many iterations to these companies but
448
00:16:04,000 –> 00:16:07,720
we were in that thing sub at dollar
449
00:16:05,720 –> 00:16:11,360
Canadian and we rotated out of it on
450
00:16:07,720 –> 00:16:13,480
like a very beautiful multi-digit X
451
00:16:11,360 –> 00:16:14,800
return on that thing and rotated into us
452
00:16:13,480 –> 00:16:16,360
we did really well on that GW
453
00:16:14,800 –> 00:16:18,440
pharmaceutical was our first investment
454
00:16:16,360 –> 00:16:20,800
in the first fund that we saw a great
455
00:16:18,440 –> 00:16:22,880
outcome once epids you know hit the
456
00:16:20,800 –> 00:16:24,920
market and the clinical trials had
457
00:16:22,880 –> 00:16:27,519
proven out on that thing we had some
458
00:16:24,920 –> 00:16:29,600
other great I mean I would say GTI I I
459
00:16:27,519 –> 00:16:32,360
always called it The Quiet Riot we were
460
00:16:29,600 –> 00:16:35,000
in it early and we mult we invested Time
461
00:16:32,360 –> 00:16:36,600
After Time After Time into that company
462
00:16:35,000 –> 00:16:39,639
it was a Quiet Riot they weren’t the
463
00:16:36,600 –> 00:16:41,519
froy medm or acreages of the world they
464
00:16:39,639 –> 00:16:43,319
have just been focused on preserving and
465
00:16:41,519 –> 00:16:45,440
growing shareholder value and have done
466
00:16:43,319 –> 00:16:47,000
that well and and focusing on you know
467
00:16:45,440 –> 00:16:48,759
balance sheet preservation all the
468
00:16:47,000 –> 00:16:50,240
things that they needed to do and I feel
469
00:16:48,759 –> 00:16:52,600
like they share a little bit of the like
470
00:16:50,240 –> 00:16:54,360
Buffet Monger mindset with Morgan and I
471
00:16:52,600 –> 00:16:56,680
about how businesses should be good
472
00:16:54,360 –> 00:16:59,240
businesses are run that has been a great
473
00:16:56,680 –> 00:17:00,880
returner time and time again for us so
474
00:16:59,240 –> 00:17:03,360
those are just some of the good ones
475
00:17:00,880 –> 00:17:05,720
there was a famous flame out that we had
476
00:17:03,360 –> 00:17:08,199
that was written about in Inc magazine
477
00:17:05,720 –> 00:17:10,559
by Willie yakowitz which was trative
478
00:17:08,199 –> 00:17:13,799
that one I would say like that was like
479
00:17:10,559 –> 00:17:16,919
the first crystallizing moment in the
480
00:17:13,799 –> 00:17:19,799
importance of board compos compositions
481
00:17:16,919 –> 00:17:22,679
and corporate governance and it was for
482
00:17:19,799 –> 00:17:25,520
me also a formative moment where there
483
00:17:22,679 –> 00:17:27,480
was this pivotal point and I don’t even
484
00:17:25,520 –> 00:17:30,000
remember this guy’s name but I we were
485
00:17:27,480 –> 00:17:31,200
on this board meeting and I had a very
486
00:17:30,000 –> 00:17:32,960
strong point of view which ended up
487
00:17:31,200 –> 00:17:34,760
being right point of view because my
488
00:17:32,960 –> 00:17:37,039
intuition was very strong about what was
489
00:17:34,760 –> 00:17:39,400
happening in this company this guy like
490
00:17:37,039 –> 00:17:41,760
basically shut me down and so I kind of
491
00:17:39,400 –> 00:17:44,160
retreated thinking oh I’m I must be off
492
00:17:41,760 –> 00:17:46,520
base here but I’ll never do that again
493
00:17:44,160 –> 00:17:48,360
and so now I’ve always been a very vocal
494
00:17:46,520 –> 00:17:50,360
board member if I’m not comfortable with
495
00:17:48,360 –> 00:17:52,120
something that’s happening that was a
496
00:17:50,360 –> 00:17:54,400
disappointing flame out it had a lot of
497
00:17:52,120 –> 00:17:55,919
promise that company but this is why
498
00:17:54,400 –> 00:17:58,159
from that moment forward board
499
00:17:55,919 –> 00:17:59,760
composition co-investors everything
500
00:17:58,159 –> 00:18:01,799
became and what what we were able to
501
00:17:59,760 –> 00:18:03,880
rescue out of that was accomplished
502
00:18:01,799 –> 00:18:05,640
through good co-investors so you know it
503
00:18:03,880 –> 00:18:07,600
cut both ways on that project although
504
00:18:05,640 –> 00:18:10,159
it ended up failing in the end thanks to
505
00:18:07,600 –> 00:18:12,720
a stupid lawsuit which I would say is it
506
00:18:10,159 –> 00:18:13,919
was bad lawsuit but anyway but then
507
00:18:12,720 –> 00:18:16,360
these are the things that can kill
508
00:18:13,919 –> 00:18:17,720
companies and you know you got you have
509
00:18:16,360 –> 00:18:21,120
to have good corporate governance and
510
00:18:17,720 –> 00:18:24,039
levers around managing through the
511
00:18:21,120 –> 00:18:27,720
chaotic environment of a startup I hear
512
00:18:24,039 –> 00:18:29,320
you and on the back of that given kind
513
00:18:27,720 –> 00:18:31,120
of the flat
514
00:18:29,320 –> 00:18:32,559
of the industry right now from state to
515
00:18:31,120 –> 00:18:34,919
state you mentioned California it’s
516
00:18:32,559 –> 00:18:36,760
incredibly tough for both macroeconomic
517
00:18:34,919 –> 00:18:38,760
factors and Regulatory reasons you ever
518
00:18:36,760 –> 00:18:40,840
thought about cashing out completely and
519
00:18:38,760 –> 00:18:42,520
bailing and you know if not what what
520
00:18:40,840 –> 00:18:45,679
keeps you coming back why do you hold
521
00:18:42,520 –> 00:18:47,919
the flame of faith that this potentially
522
00:18:45,679 –> 00:18:50,000
will explode is it the data is it the
523
00:18:47,919 –> 00:18:51,720
intuition that you mentioned what is it
524
00:18:50,000 –> 00:18:53,320
I think it’s a Confluence of factors
525
00:18:51,720 –> 00:18:55,799
that keep us coming back first of all
526
00:18:53,320 –> 00:18:57,679
we’re Mission driven investors like we
527
00:18:55,799 –> 00:18:59,400
believe that cannabis should be legal
528
00:18:57,679 –> 00:19:01,039
and that people should have access to it
529
00:18:59,400 –> 00:19:03,159
both from a medical standpoint and from
530
00:19:01,039 –> 00:19:05,559
a lifestyle standpoint especially
531
00:19:03,159 –> 00:19:08,039
instead of alcohol I mean look I love
532
00:19:05,559 –> 00:19:10,120
alcohol whatever it’s great big fan of
533
00:19:08,039 –> 00:19:11,640
tequila but I think that I want people
534
00:19:10,120 –> 00:19:14,240
to have options and I believe in the
535
00:19:11,640 –> 00:19:16,280
liberty of choice so all of that like
536
00:19:14,240 –> 00:19:17,960
aside I think when you’re Mission driven
537
00:19:16,280 –> 00:19:20,480
you know I think about people who I
538
00:19:17,960 –> 00:19:22,240
admire like Steve Jobs he was incredibly
539
00:19:20,480 –> 00:19:23,880
passionate about his product and
540
00:19:22,240 –> 00:19:25,240
everything that Apple would stand for
541
00:19:23,880 –> 00:19:26,880
and that’s how he got through the
542
00:19:25,240 –> 00:19:29,799
various cycles of that business it
543
00:19:26,880 –> 00:19:32,400
wasn’t a straight line up it never is so
544
00:19:29,799 –> 00:19:34,960
what has kept me here is that I just try
545
00:19:32,400 –> 00:19:36,840
to stay very very close to what’s
546
00:19:34,960 –> 00:19:38,600
actually happening in the businesses
547
00:19:36,840 –> 00:19:40,320
what’s actually happening from a
548
00:19:38,600 –> 00:19:42,480
political standpoint or like the
549
00:19:40,320 –> 00:19:45,039
constituent acceptance and support
550
00:19:42,480 –> 00:19:46,559
around this issue and I just believe I
551
00:19:45,039 –> 00:19:48,559
you know when you come so far in
552
00:19:46,559 –> 00:19:50,159
something to throw in the towel to
553
00:19:48,559 –> 00:19:53,039
capitulate at this point even though
554
00:19:50,159 –> 00:19:54,960
it’s been a very very difficult cycle 23
555
00:19:53,039 –> 00:19:57,120
was you know the worst year that we’ve
556
00:19:54,960 –> 00:20:00,360
had to manage through in terms of what
557
00:19:57,120 –> 00:20:02,799
really finally hit Road on this sector
558
00:20:00,360 –> 00:20:05,120
in terms of the Fallout of lack of
559
00:20:02,799 –> 00:20:06,760
capital flow lack of Reform and all the
560
00:20:05,120 –> 00:20:08,960
things that happened on the federal
561
00:20:06,760 –> 00:20:11,679
level and I think that was really what
562
00:20:08,960 –> 00:20:14,720
really catalyzed the challenges of 2023
563
00:20:11,679 –> 00:20:16,799
was when the safe banking failed to get
564
00:20:14,720 –> 00:20:19,120
included in 2022 so it was a chain
565
00:20:16,799 –> 00:20:21,039
reaction of events and then yeah there’s
566
00:20:19,120 –> 00:20:23,080
a lot of factors but what I see right
567
00:20:21,039 –> 00:20:25,679
now is the most amazing setup after
568
00:20:23,080 –> 00:20:28,280
doing this for over 10 years is you have
569
00:20:25,679 –> 00:20:29,200
a generational consumer shift coming to
570
00:20:28,280 –> 00:20:30,880
Canabis
571
00:20:29,200 –> 00:20:32,360
like I I’ve always said the easiest
572
00:20:30,880 –> 00:20:34,840
thing about cannabis is that their’s
573
00:20:32,360 –> 00:20:36,520
product Market fit and that’s just for
574
00:20:34,840 –> 00:20:38,919
the the bell curve you know it’s the
575
00:20:36,520 –> 00:20:41,039
bell curve widens out there’s so many
576
00:20:38,919 –> 00:20:43,880
canic curious people who are coming into
577
00:20:41,039 –> 00:20:45,880
the category now so our tip of the Spear
578
00:20:43,880 –> 00:20:47,600
of the Cannabis enthusiasts who’ve been
579
00:20:45,880 –> 00:20:49,360
here and who have ready to participate
580
00:20:47,600 –> 00:20:50,480
in this adult use market like I mean
581
00:20:49,360 –> 00:20:53,360
I’ll never forget when I went to the
582
00:20:50,480 –> 00:20:55,679
Ascend store in New Jersey and nobody
583
00:20:53,360 –> 00:20:58,080
knew I was an investor it’s just going
584
00:20:55,679 –> 00:21:00,720
and the fact that I could chitchat with
585
00:20:58,080 –> 00:21:02,799
people wait in line in the winter
586
00:21:00,720 –> 00:21:05,080
looking forward to getting in and they
587
00:21:02,799 –> 00:21:07,200
were like how cool is this we can buy
588
00:21:05,080 –> 00:21:08,760
cannabis you know like unsolicited
589
00:21:07,200 –> 00:21:10,840
telling me how excited they were to have
590
00:21:08,760 –> 00:21:12,360
legal weed in New Jersey like those are
591
00:21:10,840 –> 00:21:14,159
the things that keep me going seeing
592
00:21:12,360 –> 00:21:15,799
patients who have access to good
593
00:21:14,159 –> 00:21:17,159
cannabis products that they didn’t
594
00:21:15,799 –> 00:21:18,960
before those are the things that keep me
595
00:21:17,159 –> 00:21:21,159
going but from an investment standpoint
596
00:21:18,960 –> 00:21:23,120
it’s the setup that I can’t get over
597
00:21:21,159 –> 00:21:26,039
which is that consumer shift so a
598
00:21:23,120 –> 00:21:27,720
growing Tam the more states that open
599
00:21:26,039 –> 00:21:29,200
like Missouri and Maryland I mean when
600
00:21:27,720 –> 00:21:30,919
you look at the states when they open
601
00:21:29,200 –> 00:21:33,400
it’s just incredibly exciting to see the
602
00:21:30,919 –> 00:21:36,440
sales data and the growth and and the
603
00:21:33,400 –> 00:21:38,240
diversification of product and baskets
604
00:21:36,440 –> 00:21:40,400
that happen with the consumers which
605
00:21:38,240 –> 00:21:43,480
shows again kind of that broadening of
606
00:21:40,400 –> 00:21:46,520
the bell curve and then I see the setup
607
00:21:43,480 –> 00:21:48,320
of the Catalyst that all the people
608
00:21:46,520 –> 00:21:49,799
outside of the industry are waiting for
609
00:21:48,320 –> 00:21:51,799
which is the potential for banking
610
00:21:49,799 –> 00:21:53,840
reform the potential for you know a
611
00:21:51,799 –> 00:21:56,200
lawsuit against the government that
612
00:21:53,840 –> 00:21:58,760
changes this the application of the CSA
613
00:21:56,200 –> 00:22:01,279
to these legal businesses in within
614
00:21:58,760 –> 00:22:03,880
States and the third being of course the
615
00:22:01,279 –> 00:22:05,559
scheduling of cannabis so I’m seeing a
616
00:22:03,880 –> 00:22:07,000
number of things setting up and that’s
617
00:22:05,559 –> 00:22:08,279
what I can’t look away from it because
618
00:22:07,000 –> 00:22:10,760
I’ve been here too long building
619
00:22:08,279 –> 00:22:12,480
businesses this whole time to do it so
620
00:22:10,760 –> 00:22:14,559
got it the only way out is through but
621
00:22:12,480 –> 00:22:18,000
it’s not been easy if anyone thought it
622
00:22:14,559 –> 00:22:19,960
was easy they should spend a day with me
623
00:22:18,000 –> 00:22:21,600
I could uh I could scare the pants off
624
00:22:19,960 –> 00:22:24,880
of anyone about the things I’ve seen in
625
00:22:21,600 –> 00:22:26,720
an emerging market like this yeah I bet
626
00:22:24,880 –> 00:22:28,559
and there are so many exciting things
627
00:22:26,720 –> 00:22:29,679
about it and and maybe one of those
628
00:22:28,559 –> 00:22:31,360
things is the last thing that you
629
00:22:29,679 –> 00:22:34,679
mentioned kind of in the pillars of
630
00:22:31,360 –> 00:22:37,600
Reform and huge catalysts which is this
631
00:22:34,679 –> 00:22:39,880
potential on the horizon for a cannabis
632
00:22:37,600 –> 00:22:41,559
reschedule um and I keep saying unless
633
00:22:39,880 –> 00:22:43,080
you’re living under a rock you know
634
00:22:41,559 –> 00:22:44,559
about this right this is the biggest
635
00:22:43,080 –> 00:22:46,880
thing potentially to happen to cannabis
636
00:22:44,559 –> 00:22:49,799
in decades and Decades of prohibition it
637
00:22:46,880 –> 00:22:53,679
is also in my opinion one of the most
638
00:22:49,799 –> 00:22:55,279
annoying loud karay filled things that’s
639
00:22:53,679 –> 00:22:57,200
happening in the industry and I find
640
00:22:55,279 –> 00:22:59,080
these things insufferable because nobody
641
00:22:57,200 –> 00:23:01,440
no lawyer no regulator nobody has a
642
00:22:59,080 –> 00:23:04,240
crystal ball and this is complicated
643
00:23:01,440 –> 00:23:06,200
complex administrative rulemaking with
644
00:23:04,240 –> 00:23:09,039
potentially the public health and safety
645
00:23:06,200 –> 00:23:12,240
of millions at stake not to be dramatic
646
00:23:09,039 –> 00:23:14,120
but if schedule 3 happens number one
647
00:23:12,240 –> 00:23:15,840
what happens in your world as an
648
00:23:14,120 –> 00:23:18,559
investor as a wholesale cannabis
649
00:23:15,840 –> 00:23:20,880
investor and two you know what are you
650
00:23:18,559 –> 00:23:23,159
paying attention to about schedule 3 as
651
00:23:20,880 –> 00:23:25,360
an investor yeah sometimes I’m like oh
652
00:23:23,159 –> 00:23:27,600
is this just me after 10 years of being
653
00:23:25,360 –> 00:23:29,360
battle tested by waiting for something
654
00:23:27,600 –> 00:23:31,440
to happen and then it happens or doesn’t
655
00:23:29,360 –> 00:23:32,799
happen or the recision of the coal memo
656
00:23:31,440 –> 00:23:34,440
or all the things that have happened
657
00:23:32,799 –> 00:23:36,640
through the course of having invested in
658
00:23:34,440 –> 00:23:38,760
cannabis or even the exogenous stuff
659
00:23:36,640 –> 00:23:40,520
that happens like the aragos event which
660
00:23:38,760 –> 00:23:42,520
changes the custody around the stock
661
00:23:40,520 –> 00:23:44,600
things like that or the risk profiles
662
00:23:42,520 –> 00:23:46,279
are like Cowen gets bought by TD and all
663
00:23:44,600 –> 00:23:48,000
of a sudden now they won’t let you you
664
00:23:46,279 –> 00:23:50,120
know hold stocks with you know there’s a
665
00:23:48,000 –> 00:23:53,799
lot of things that have gone on so then
666
00:23:50,120 –> 00:23:56,960
when when I see people boiling down such
667
00:23:53,799 –> 00:24:00,360
an important and complicated thing as
668
00:23:56,960 –> 00:24:02,600
the DEA approving the scheduling
669
00:24:00,360 –> 00:24:05,440
recommendation that came from the HHS
670
00:24:02,600 –> 00:24:07,960
and putting it forth as policy or as a
671
00:24:05,440 –> 00:24:10,120
framework it’s we cannot be too
672
00:24:07,960 –> 00:24:12,000
reductionist about this and we have to
673
00:24:10,120 –> 00:24:14,400
think about every corner we have to look
674
00:24:12,000 –> 00:24:16,200
around associated with this and maybe
675
00:24:14,400 –> 00:24:18,080
it’s because we had an investment in
676
00:24:16,200 –> 00:24:21,080
this company called PX and then juwel
677
00:24:18,080 –> 00:24:22,720
spun out of it and anyone who’s watched
678
00:24:21,080 –> 00:24:24,400
what happened with juel knows what it’s
679
00:24:22,720 –> 00:24:28,200
like to try to work with a federal
680
00:24:24,400 –> 00:24:31,039
agency the FDA really slapped around not
681
00:24:28,200 –> 00:24:33,480
just e Market but juwel in particular
682
00:24:31,039 –> 00:24:36,120
and the only thing I know about that is
683
00:24:33,480 –> 00:24:39,360
that the opacity of how these decisions
684
00:24:36,120 –> 00:24:42,679
are made is immense we have no to say we
685
00:24:39,360 –> 00:24:45,240
have a crystal ball is insane at best we
686
00:24:42,679 –> 00:24:47,480
have like an opaque rock that we’re
687
00:24:45,240 –> 00:24:49,600
looking at to try to understand what the
688
00:24:47,480 –> 00:24:50,799
DEA is going to do and I always try one
689
00:24:49,600 –> 00:24:53,279
thing I learned when I was on the board
690
00:24:50,799 –> 00:24:55,320
of the mppp is like trying to understand
691
00:24:53,279 –> 00:24:58,399
the motivations of the groups who are
692
00:24:55,320 –> 00:25:01,360
involved in the decision making the daa
693
00:24:58,399 –> 00:25:04,120
is going to take this very seriously
694
00:25:01,360 –> 00:25:07,520
because the DEA has funding around the
695
00:25:04,120 –> 00:25:10,440
enforcement of Narcotics and cannabis is
696
00:25:07,520 –> 00:25:12,600
a schedule one sitting right in their
697
00:25:10,440 –> 00:25:15,600
wheelhouse of things that they get
698
00:25:12,600 –> 00:25:17,720
funded to oversee and they’re also this
699
00:25:15,600 –> 00:25:20,679
is kind of embedded in the culture of
700
00:25:17,720 –> 00:25:22,840
the DEA around narcotics is the
701
00:25:20,679 –> 00:25:24,720
perception around cannabis not being a
702
00:25:22,840 –> 00:25:26,720
positive one not being one where there
703
00:25:24,720 –> 00:25:28,520
are good things coming from it and you
704
00:25:26,720 –> 00:25:31,039
can just go back and look at the history
705
00:25:28,520 –> 00:25:33,080
of this with President Nixon too so
706
00:25:31,039 –> 00:25:34,919
there’s just so many things around this
707
00:25:33,080 –> 00:25:37,520
that I think it’s just going to be a
708
00:25:34,919 –> 00:25:39,120
little bit more tumultuous than I think
709
00:25:37,520 –> 00:25:40,840
people think and then let’s okay so then
710
00:25:39,120 –> 00:25:42,159
it’s schedule three so what do what do I
711
00:25:40,840 –> 00:25:43,600
think about that I’m very excited
712
00:25:42,159 –> 00:25:45,360
because I do think it deserves to be
713
00:25:43,600 –> 00:25:47,559
moved out of schedule one and God forbid
714
00:25:45,360 –> 00:25:49,480
it goes into schedule two schedule 3 is
715
00:25:47,559 –> 00:25:51,640
fine we’ve always wanted it to be
716
00:25:49,480 –> 00:25:53,320
descheduled and treated like alcohol but
717
00:25:51,640 –> 00:25:55,320
we know that there’s not a a
718
00:25:53,320 –> 00:25:57,320
constitutional amendment coming for
719
00:25:55,320 –> 00:26:00,880
cannabis the way that it came for
720
00:25:57,320 –> 00:26:03,080
alcohol so I think that once we so from
721
00:26:00,880 –> 00:26:05,200
an investment standpoint once we find
722
00:26:03,080 –> 00:26:07,120
out what the dea’s point of view on this
723
00:26:05,200 –> 00:26:09,399
and what they hand down we have to
724
00:26:07,120 –> 00:26:10,960
spring into action immediately to try to
725
00:26:09,399 –> 00:26:13,120
understand what that’ll mean and what
726
00:26:10,960 –> 00:26:15,080
that’ll mean in terms of okay and what
727
00:26:13,120 –> 00:26:17,399
is you know we all talk about it as the
728
00:26:15,080 –> 00:26:19,039
exciting upside of the 280e tax code
729
00:26:17,399 –> 00:26:21,080
being removed which is you know
730
00:26:19,039 –> 00:26:23,360
egregiously applied to schedule one
731
00:26:21,080 –> 00:26:25,039
products for lack of a better word so
732
00:26:23,360 –> 00:26:26,480
that’s exciting but how what’s that
733
00:26:25,039 –> 00:26:27,919
going to look like and what’s that going
734
00:26:26,480 –> 00:26:29,960
to look like from a federal tax
735
00:26:27,919 –> 00:26:31,799
perspective on the other side you know I
736
00:26:29,960 –> 00:26:34,760
don’t I don’t know the IRS probably
737
00:26:31,799 –> 00:26:36,799
enjoys the revenue they see from 280 and
738
00:26:34,760 –> 00:26:38,360
so does our government and so what does
739
00:26:36,799 –> 00:26:40,080
that look like so I’m not thinking this
740
00:26:38,360 –> 00:26:41,960
is like the Silver Bullet that solves
741
00:26:40,080 –> 00:26:43,720
all things which is why we are pursuing
742
00:26:41,960 –> 00:26:45,520
other things such as this case we’re
743
00:26:43,720 –> 00:26:47,840
working with boy Schiller on as an
744
00:26:45,520 –> 00:26:49,960
industry and helping out these these
745
00:26:47,840 –> 00:26:51,640
defendants and trying to be people who
746
00:26:49,960 –> 00:26:53,520
pull things together but one thing I’ve
747
00:26:51,640 –> 00:26:55,159
learned over this you know course of
748
00:26:53,520 –> 00:26:57,960
time is you have to have multiple shots
749
00:26:55,159 –> 00:26:59,840
on goal to try to influence reform and
750
00:26:57,960 –> 00:27:02,760
so I’m not somebody who thinks this is a
751
00:26:59,840 –> 00:27:05,120
silver bullet but I do think though from
752
00:27:02,760 –> 00:27:07,720
Capital coming into the industry this is
753
00:27:05,120 –> 00:27:09,559
one of those catalytic moments and so
754
00:27:07,720 –> 00:27:11,960
for that I am excited because this
755
00:27:09,559 –> 00:27:14,600
industry deserves to be capitalized to
756
00:27:11,960 –> 00:27:16,600
drive innov to drive Innovation to drive
757
00:27:14,600 –> 00:27:19,200
support for the consumers and all the
758
00:27:16,600 –> 00:27:21,240
things that go on with investing into an
759
00:27:19,200 –> 00:27:23,559
Emerging Market well Emily I’m going to
760
00:27:21,240 –> 00:27:25,799
let you go with that question and that
761
00:27:23,559 –> 00:27:28,279
sentiment and I feel very confident that
762
00:27:25,799 –> 00:27:30,360
no matter what reform is on the horizon
763
00:27:28,279 –> 00:27:33,279
either tomorrow or years from now I will
764
00:27:30,360 –> 00:27:35,960
likely see you and Poseidon on the other
765
00:27:33,279 –> 00:27:37,600
side hopefully in a very very successful
766
00:27:35,960 –> 00:27:39,600
capacity for all of the time and
767
00:27:37,600 –> 00:27:41,240
Goodwill put in and I know personally
768
00:27:39,600 –> 00:27:43,840
and I can share that with listeners
769
00:27:41,240 –> 00:27:45,720
Poseidon has propped up many many
770
00:27:43,840 –> 00:27:47,399
operators in this industry that are
771
00:27:45,720 –> 00:27:49,159
still rocking and rolling today and
772
00:27:47,399 –> 00:27:52,080
without that this industry would be way
773
00:27:49,159 –> 00:27:54,360
weaker for it so Emily thank you for
774
00:27:52,080 –> 00:27:57,120
your opinions your insights super
775
00:27:54,360 –> 00:27:59,120
valuable we really appreciate it thank
776
00:27:57,120 –> 00:28:00,720
you
777
00:27:59,120 –> 00:28:03,519
and that concludes today’s episode of
778
00:28:00,720 –> 00:28:06,930
the Cannabis law Now podcast until next
779
00:28:03,519 –> 00:28:10,709
time stayer stay
780
00:28:06,930 –> 00:28:10,709
[Music]
781
00:28:10,880 –> 00:28:13,880
alive
