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The Highlights

It was a lackluster week for cannabis stocks, with the US cannabis MSOS ETF sliding 3.87%, while the global YOLO dropped 4.27%. Green Thumb Industries (CSE: GTII, OTCQX: GTBIF) was the only major MSO in the black, as investors were modestly encouraged by the Boston Beer Company (NASDAQ: SAM) conversation. Last Tuesday, we learned Green Thumb Founder, Chairman, and CEO Ben Kovler sent a letter to Boston Beer’s Founder and Chairman James Koch proposing a merger between the two companies. Kovler feels this would be a superior and more valuable offer for shareholders of Boston Beer. Kovler cites GTI does 2x more in EBITDA, it operates in similar categories, and GTI’s multiple could expand if the stock were on a higher exchange. Boston Beer trades at a roughly 50% premium to GTI. We see potential synergies in distribution channels if cannabis evolves to a three-tiered system like the alcohol industry uses and it provides an elegant way for Green Thumb to further expand into the burgeoning cannabis beverage category. However, we find it less compelling to merge with a company in a shrinking space. While the cannabis industry is on the brink of major growth as key states like Ohio, Minnesota, and potentially Florida and Pennsylvania transition to adult-use sales, the beer industry is expected to shrink 1.7% in 2025. This week on Higher Exchanges, we discussed the potential partnership between Green Thumb and Boston Beer merger and analyzed the proposed merger between Cansortium (CSE: TIUM, OTCQX: CNTMP) and RIV Capital (CSE: RIV, OTCQX: CNPOF). Interested investors can listen to the episode on Apple Podcasts, Spotify, or on X Spaces. On Friday, Florida Governor Ron DeSantis vetoed a bill that would bring new restrictions to the state’s thriving intoxicating hemp market. He claims the changes would hurt small businesses. DeSantis stated, “Senate Bill 1698 would introduce dramatic disruption and harm to many small retail and manufacturing businesses in Florida.” In April, DeSantis was asked about allowing regulated adult-use cannabis sales and said, “Do we want to have more marijuana in our communities? I don’t think it'll work out well.” It’s confusing how one could support an unregulated intoxicating hemp market, while simultaneously campaigning against regulated legal adult-use cannabis. It appears his intentions are politically motivated rather than creating a safe architecture that is in the best interest of Florida residents. Thankfully, Florida citizens will decide the fate of adult-use cannabis and this week a Fox News poll showed 66% support Amendment 3. The vote will take place on November 5 and requires 60% to pass. If successful, sales would start in mid-2025 and Florida will quickly become one of the largest and more profitable markets in the country.