The first public hearing on New Hampshire House Bill 481, which would legalize the adult use of cannabis in the state, is scheduled for February 5, 2019. The bill outlines how New Hampshire would regulate cannabis products, including recreational “adult use” products, the licensing and regulation of sales establishments, and the taxation scheme.
Massachusetts, Maine and Vermont all have legalized the “adult use” of cannabis, leaving New Hampshire as the only state in northern New England that has yet to do so. New Hampshire’s economy is very integrated into the New England and Metro Boston economies and serves as a valuable new market for the cannabis industry.
The February 5 public hearing will begin at 1:00 p.m. at Representatives Hall in the State House before the House Criminal Justice and Public Safety Committee. The committee will amend the bill the following day, vote on the bill on Thursday, February 7, and send the bill to the floor of the New Hampshire House for its consideration in February.
Although Governor Christopher T. Sununu has said he will veto the bill, the bill is receiving bipartisan support and is expected to easily pass the House and Senate in the coming weeks, setting the stage for a potential veto override. It is also anticipated that the legislative effort will take a couple of months. Duane Morris will continue to follow these developments.
Read the full Duane Morris Alert.
A long standing legal prohibition on federal enforcement against state legal medical cannabis operators expired on December 21, 2018 when the U.S. Government partially shut down. The amendment had been renewed and extended multiple times through that date.
First adopted in 2014, the amendment to annual appropriations bills known as the Rohrabacher-Blumenauer Amendment is expected to be reimplemented when the Government is reopened and the current budget stalemate resolved. In the meantime, however, technically, federal enforcement against state legal medical cannabis companies is possible. That said, most of the government agencies who could pursue such enforcement remain unfunded and shut down.
Most commentators also do not expect to see any change in federal enforcement activity as public sentiment, Congressional activity and state legalization efforts are all moving in the direction of ultimately eliminating prohibition on the medical and adult use of cannabis.
Many believe that cannabis stocks are experiencing a “bubble,” meaning that market valuations are unjustified, unrealistic and based on investor hype as opposed to typical fundamental markers such as revenues, assets and profit. Some, like The Motley Fool, believe this is a bubble ready to burst. The Wall Street Journal includes quotes from new entrants in the space suggesting this is much like the Internet stocks of 1997 or 1998, remembering that in 2000 the Internet stocks crashed mightily, taking years to recover after many companies did not survive the shakeout.
The cannabis data analytics company New Frontier Data reports that, year to date, seven of the top 12 cannabis stocks have posted more than 200% gains. The data company also seems to be recommending that, “As cannabis stocks continue to rally, prudent investors should consider taking profits and exercising caution.” The AP just quoted a stock analyst warning, “[i]f there is a bubble, larger investors will protect themselves and won’t overinvest in single companies, but smaller investors who see a chance to get rich quickly could suffer painful losses.”
It is true that, in particular in Canada, cannabis stocks are trading at extremely high valuations relative to the companies’ financial condition and results. One company, for example, with around $20 million in first half revenues, is trading at the same valuation as Macy’s, which has $25 billion in annual revenue. In the US the valuations are a bit more down to earth, but also considered by most to be high given performance.
Many others, including leaders of companies with these high-flying stocks, strongly believe these valuations are justified based on the tremendous future potential of the cannabis industry as we get closer to federal legalization in the US and global growth proceeds as well. They believe that as long as investors continue to believe in the future of the very rapidly growing industry, the valuations will continue to stay strong and be justified, and performance will grow to further support the bubble pricing. But the thing about bubbles…