Greetings, Welcome to the inaugural edition of The Cannabis Quarterly! You’re receiving this because you’ve previously expressed interest in the industry or we thought you’d find this informative. In this newsletter, we promise to bring you updates and insights on our experiences in the fast-growing and rapidly evolving cannabis industry. We’ve been actively involved for several years now, including raising capital and investing in companies, and we’ve come across an incredible amount of misperception and hyperbole. So our first newsletter is an attempt to address this head-on and, hopefully, paint a clearer picture of what’s really happening. To start with, let’s review the facts. 28 states have legalized cannabis in some form, which covers 190 million people, or 60% of the U.S. population. We believe this equates to current industry spending of $6 billion with an expected annual growth rate of more than 20%. Next, some people are concerned that Trump will reverse the friendly trend in Federal cannabis policy. As a reminder, the previous administration de-prioritized Federal enforcement through the Cole Memo, which also indicated a deference to states’ rights. With the confirmation of attorney general Jeff Sessions, who has expressed anti-cannabis views, some worry about the direction of Federal policy. While good fodder for the media, we are not convinced. We believe the Federal government will find it challenging to change course for the following reasons: (i) states’ rights are paramount to both the current administration and its party; (ii) the Federal government has limited resources to act; and, (iii) in states with legalization, cannabis has been a boost for the local economy. (Please click here for a more detailed discussion). Suffice it to say, we believe the risks have not increased exponentially under Trump and that diligent industry participants who follow state laws should continue to operate uninterrupted. But how has cannabis legalization affected communities? Is it the disaster that detractors would have you believe? Let’s take a look in more detail. To begin, cannabis legalization has been a boost for state economies. As an example, Colorado saw +$200M in cannabis-tax revenue and +18,000 new jobs created last year. Perhaps even more salient, states with medical legalization have seen opioid usage decline across their population. Not only are doctors prescribing less, but hospital admissions due to opioid abuse have also declined. Finally, teen usage of cannabis has actually decreased while overall traffic deaths have fallen. Like many consumer products, the precise health impact of cannabis likely varies tremendously based on the individual plus consumption frequency and method. However, two facts about cannabis consumption cannot be questioned. First, cannabis has proven medical benefits (here is a general overview, but we can send specific examples/research upon request). Second, per NIDA, there has never been an overdose death from cannabis. Given this backdrop, we believe there is a tremendous market opportunity here, and as such, we created Presidio View Capital as one of the first investment managers focused exclusively on cannabis. To date, we’ve closed three private investments and have invested in one publicly-traded stock. The investments range in terms of geography and industry segment, with the one constant being the presence of talented management teams. Given the dynamic competitive and regulatory environments, we believe management teams are especially important (and equally hard to find!). Over the coming months, we’ll use this newsletter to expand on each investment so that you can get a feel for how we look at the industry, its segments, and the participating companies. Please stay tuned! In summary, we’re extremely excited as this is just early innings in a long, secular growth cycle. We look forward to communicating with you on future developments (industry and otherwise) and investment opportunities. By virtue of receiving this you're already on our list but if you know anyone that might be interested in learning more, please pass the email along and have them subscribe using the link below. Cheers,
Mike and Kip Co-Managers, Presidio View Capital