CRISIS AND OPPORTUNITY

As much of the American economy ground to a halt, many cannabis businesses reported surging sales. While some businesses may benefit from higher demand, the coronavirus crisis appears certain to exacerbate the industry’s structural and financial woes.

• The crisis is likely to have “dire” consequences for the industry, Business Insider reports. Observers say it’s likely to disrupt supply chains and accelerate a “months-long shakeout period,” that has pushed underfunded start ups to the brink of collapse.
• “Private cannabis companies who are in the process of fundraising or had plans to do so in 2020 will likely struggle to raise capital,” said Pete Karabas, founding partner of Key Investment said.
• Companies that survive may be best positioned to capitalize on coming industry consolidation.
• “We believe focus among cannabis investors has shifted to minimizing downside; in other words, evaluating cannabis stocks from a liquidation perspective, simply comparing market capitalization to net cash balances,” CIBC analyst John Zamparo wrote in a March 11 note.
  Bloomberg
• It was a rare week when pot stocks outperformed mainstream companies. The New Cannabis Ventures Global Cannabis Stock Index fell a mere 8.5% as the S&P 500 plunged a gut wrenching 15%.

One of the big early questions is whether consumption will climb during the crisis or consumers have been hoarding product out of fear.

• Dispensary software company Dutchie said Monday was a record day for sales. The platform then broke those records on Tuesday and again on Wednesday.

Kris Krane, president of MSO 4Front writes, cannabis businesses may need a bailout.
Forbes

• Cannabis businesses will not be eligible for the $50B in low-interest loans to be distributed by the Small Business Administration.
  Cannabis Business Times

Quick Hits

1. Canna Law Blog‘s John Rapp dives into the issue of force majeure — Act of God — clauses in cannabis contracts. “Who can, legally, refuse to refund a deposit? To refuse a payment? Who will lose any claim for breach? As with many legal issues, the answers depend on both contractual and factual circumstances.”
2. Earlier this month, software company Green Bits laid off 40 employees.
   Business Insider