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Jushi Is Starting To Look Like One Of The Best Value Plays In The U.S. Cannabis Sector

Feb 2, 2022 • 7:50 AM EST
3 MIN READ  •  By Michael Berger
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In early 2021, Virginia surprised the market after lawmakers approved legislation to legalize recreational cannabis within five year. Analysts have forecasted approx. $1.5 billion of sales per year and we will monitor how the market continues to evolve. 

Around a year later, Republican lawmakers in Virginia announced new legislation that would make significant changes to the recreational cannabis law that was enacted last year. From helping businesses to threatening social equity efforts, the new changes are wide ranging and we will monitor how state lawmakers respond to them. According to the Associated Press, some of the changes that were reported include:

  • Moving up the planned launch of the recreational cannabis market prior to 2024
  • Lowering the overall tax rate from 21% to 10%
  • Earmarking 30% of the tax revenue for school facilities instead of communities that have been affected by the war on drugs

Although we believe the changes to the recreational cannabis law that was enacted last year are significant, not all of the amendments to the legislation have not been received. The legislation that was enacted last year includes a reenactment clause that requires lawmakers to vote again on several regulatory and licensing details.

The Virginia Minority Cannabis Coalition is one of several advocates that are against the elimination of equity funding to ensure that the recreational cannabis industry is equitable and inclusive.

An Emerging Market to be Aware of

A primary goal of the legalization of recreational cannabis in Virginia is related to putting pressure on the state’s illicit cannabis market as soon as possible. We are favorable on how Virginia’s cannabis industry has advanced and consider any positive development to be significant due the conservative nature of the state. 

Jushi Holdings Inc. (CSE: JUSH) (OTCQX: JUSHF) is one of the few multi-state operators (MSO) to be levered to Virginia. In 2019, the company acquired Dalitso LLC, which was one of the first operators to be granted a cannabis businesses license in Virginia. According to the agreement, Jushi acquired Dalitso for approx. $16 million of cash, stock and convertible promissory notes, and we are bullish on this aspect of the business over the long-term.

In the fourth calendar quarter of 2021, Jushi opened its second dispensary in Virginia and we are favorable on how the management team has been able to advance the business. The company is approved to open up to six dispensaries and we expect the market to serve as a more significant growth driver as the business continues to ramp up. 

We believe that Jushi owns an attractive portfolio of US cannabis assets and will monitor how these assets help with the growth of the business over the long-term. During the last few years, the US cannabis business has been executing on an inorganic growth strategy and has acquired a diverse portfolio of operators. Some of the most significant acquisitions include:

  1. A dispensary in San Diego
  2. Several dispensaries in Pennsylvania
  3. Intellectual property (IP) from The Clinic, The Lab, and The Bank. 
  4. The Mend which opened its first store in New York earlier this year

One of the reasons for our bullish view on Jushi’s acquisition strategy is based on the management team’s focus on purchasing cash-generating assets in recreational cannabis markets as well as in limited license medical markets that are expected to transition to recreational cannabis markets in the near future.

From Pennsylvania to California, Jushi is focused on capitalizing on some of the largest cannabis markets in the US. At current levels, we believe the company is trading at a discount to US cannabis operators that own similar assets and our readers should be following the business. We believe the management team is executing on multi-faceted expansion strategy and consider the business to be under underappreciated by the street. 

If you are interested in learning more about Virginia and the companies that are levered to it, please send an email to support@technical420.com with the subject “Who is Capitalizing on the Virginia Cannabis Market” to be added to our distribution list. 

For the fastest access to data on Virginia and the companies that are levered to it, sign up for our free newsletter!

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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