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The Highlights

This week, the AP reported the DEA has agreed with the HHS recommendation to move cannabis from Schedule I to Schedule III. This would remove the 280E tax burden for plant-touching operators, allow for meaningful medical research, and attract new investors. Read the details about the announcement in our DEA Signs Off on Schedule III update note. Link in our full report. The US cannabis MSOS ETF gained 10.14% this week, while the global YOLO ETF climbed 7.67%. Schedule III benefits US plant-touching operators the most, so we are not surprised to see the continued outperformance of MSOS over YOLO. Among the larger MSOs, Cannabist (NEO: CBST, OTCQX: CBSTF) had the best week +18.95%, while Ascend (CSE: AAWH, OTCQX: AAWH) was the only top 10 MSO to end the week in the red at -1.54%. On Tuesday, we recorded a special episode of Higher Exchanges with Curaleaf (TSX: CURA, OTCQX: CURLF) Executive Chairman Boris Jordan and Founder of Ananda Strategy Hirsh Jain. We discussed the next steps, timelines, and implications of the landmark announcement. Those interested can listen to the episode on Apple Podcasts, Spotify, or on X. Links in our full report. This week, we initiated coverage of Gold Flora (NEO: GRAM, OTCQX: GRAM), one of California’s leading vertically integrated operators. Those interested can read the report via the link in our full report. We also hosted an introduction to Gold Flora interview with CEO Laurie Holcomb. Those interested can access links in our full report. We also initiated coverage of CLS Holdings (CSE: CLSH, OTCQX: CLSH). The company is outperforming in Nevada and expanding nationally. Those interested can read the report via a link in our full report. On Monday, May 6 at 4:00 pm ET, we are hosting an introduction to CLS Holdings interview with Chairman and CEO Andrew Glashow on X Spaces. Those interested can listen live or hear the recording via the link in our full report. LEEF Brands (CSE: LEEF, OTCQX: LEEEF) is the leading producer of bulk concentrates in California. We recently toured its 12,500-square-foot extraction facility and wrote an update note documenting our experience and sharing pictures of the visit. It’s an impressive facility and those interested can read the report via a link in our full report. Increasing institutional ownership is a key part of the cannabis investing thesis. On average, the Tier 1 MSOs are still just 7.5% institutionally owned versus 70.6% for a sampling of top alcohol and tobacco stocks. That’s a 941% difference. Those interested can read more about the difference in institutional ownership and how this may evolve in our article Build It and They Will Come. Link in our full report. MSO earnings season starts this week with eight of the top 10 US operators reporting. Consensus expectations are for the top 10 MSOs to show a 2.62% contraction in revenue Q/Q and adjusted EBITDA to decline 6.18%. 1Q tends to be the softest and with no new states opening this quarter, there are limited opportunities for growth outside of opening new stores and growing wholesale revenue.