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Criminal justice reform, safe banking and tax reforms are the hottest issues in the cannabis sector: Curaleaf Exec. Chairman

Boris Jordan, Curaleaf Executive Chairman joins the Yahoo Finance Live panel to discuss the latest cannabis legislation and the cannabis outlook for 2021.

Video Transcript


ZACK GUZMAN: Welcome back to Yahoo Finance Live. The cannabis sector is poised for a hot year, as more states begin the legal sale of marijuana and Democrats gear up to push for some more serious reforms in Congress. Of course, Democrats winning control of the Senate through those key Georgia Senate runoffs, it sped up hopes that something could come together sooner rather than later.

And cannabis companies here in the US are looking to seize the moment. Curaleaf, the largest US multi-state operator, is pouncing by raising nearly $200 million in a new offering and today, completed a new $50 million revolving credit facility. So for more on those moves and more, we're joined by Curaleaf Executive Chairman, Boris Jordan. Joins us now.

Boris, good to have you on the show. You made it clear that now is the time to be building out capabilities in these new markets. So what's the first thing money is going to here? Is it just taking advantage of the fact maybe that you got the stock trading near all time highs or is it more looking forward to put that money to work right now in maybe increasing inventory or other things?

BORIS JORDAN: Thanks for having me. I am-- for Curaleaf, the minute we saw an unexpected turn of events in Georgia, we decided that it's likely that regulations will be moved much quicker under the current presidential administration and the current Congress than we had under the Trump administration. And we felt that it was the right time for the company to raise capital.

We actually raised 250 on the equity side. We raised another 50 of debt. So we raised $300 million in order to catch up in order to have the ability to invest across the country in all of those states and new states that we think that will be coming online, and the fact that regulation will be much faster. And so, it really was there in order to prepare the company for what we think will be an acceleration of growth.

ZACK GUZMAN: And when it comes to what we could see through, there's a wide gamut that investors might be bracing for. Of course, the Safe Banking Act could give access to banking and that's maybe on the more moderate side. The States Act could see some more structural changes here, including tax implications.

Then, you got the Kamala Harris backed MORE Act which would federally decriminalize and open the door for your Canadian competitors to maybe swoop into the US. So from a business perspective, I could see maybe why you might want to distance from the MORE Act to maybe protect the moat as a US operator.

But from a social perspective, a lot of people are highlighting the fact that look. If you don't federally decriminalize or maybe address some of the social issues, there's still a bit of people who find issue with thousands of people remaining in prison for cannabis offenses while companies like yours profit off of it. So what do you want to see changed and what do you expect to see changed given all maybe the push here for the criminal justice reforms?

BORIS JORDAN: Well I think on the criminal justice reform is a vastly different issue than that Safe Banking or the States Act. Let's be honest. I mean, if you decriminalize who we're supportive of, you also have to legalize. Because if you just decriminalize, what you'll do is you'll just open the market up to the illicit market.

And the market that actually pays taxes produces safe products-- that is, the legal market where Curaleaf plays-- will just fall apart. And we saw that in Massachusetts early on where Massachusetts decriminalized, but didn't give out the licenses for another two or three years. And the black market just proliferated in that state because of that decision.

So it has to be a comprehensive package, which addresses all the issues, not just some of the issues. So obviously, issue number one for the whole sector is to deal with the criminal justice system, an issue then-- and the changes that have to take place there. Issue number two really is Safe Banking and the tax issue.

So I would say the three hottest issues for the cannabis sector are social justice reform, two is banking and the access of banking to all of us operators, and three is the tax issue with 280E taxes. So those are the three major issues. And I think that's much more important than opening up our market to players from the outside because most countries have protected their markets, at least in the cannabis space for operators operating in those markets or being local operators. And so, I think the criminal justice reform, the Safe Banking, and the tax reforms are the most important.

ZACK GUZMAN: Yeah. Maybe comparing to the alcohol market as well, I mean, you think about it in the long run. And so much is debated about the importance of the black market coming in here in market sizing. Because you know, you might have someone whose experience in the cannabis market who maybe has access to the black market, gone through a dealer.

Now, you have legalization. What could that mean? That would impact that. But when you talk about so many people who maybe have no experience with cannabis and now you, as a vertical operated company here, if you can grow it and maybe start to roll out some new products-- gummies or other things that could potentially come through here-- how big of a factor is that maybe as we see more people focus on drinks?

Can it be growth obviously focusing in on drinks? You had Aphria taking out SweetWater in a beer brewer there, maybe potentially also opening their road for drinks. I mean, how much importance should be put on that form factor in attracting new customers here in that debate versus the black market?

BORIS JORDAN: I mean, Zach, obviously, the formulated products market is going to be where the market is. And that's where Curaleaf is the strongest. That's what we're focusing on, building our brands and building our products. We will be the first company, because of our size, to launch a national product launches this year.

We're going to have two or three of them in the first quarter and then more and more as we go along. And those will be the first true national launches where we're national, where we're launching new products-- very highly formulated products-- for specific types of both conditions and recreational purposes across the whole company.

So 23 states will have full cannabis product launches from Curaleaf this year. And so as we expand the state footprint, we'll be able to do more of that. But that's the first time you're going to see two major US brands launching products across all the states like you would in any other consumer goods product that you do. So we're really excited about it and we think that the formulated products market is the future of the cannabis market.

Obviously, there'll always be those that want to smoke, but it's very difficult to first brand smokable product. And two, let's be honest. Any smokable product has still got some issues around it in terms of health. So we personally think the future of the market is going to be in highly formulated products, like drinks, like vapes, like gummies, like all sorts of slow release sleep aids, anxiety aids, et cetera, et cetera.

And as you know, we're dividing it up between Curaleaf, which is our wellness brand, and Select, which is our adult use brand, which I know you and Joe have talked about. And we're doing national launches this year, which will be the first time any company has done that.

ZACK GUZMAN: I mean obviously, there's a lot of reason for excitement in the space too. We had one of the top cannabis analysts on the show last week, Vivien Azer, talking about the whole space that could see about a 50% boost just by accessing major US exchanges if we see some of these reforms come through. And I know you don't want to talk about the stock price.

No executive chairman likes commenting on the stock price. But given what we've seen on the reform side here in the hopes there, what would you say to that maybe that call you could see a 50% boost here just by accessing exchanges? Put aside maybe some of the tax issues we were just discussing, or maybe not being able to access traditional financing.

I mean, would you say that a call like that maybe sounds conservative for what Curaleaf could be in 2021? What's your take?

BORIS JORDAN: Zach, my job-- that's what analysts are for. They predict stock prices. My job is to build a world class company. I want to be the leader, not only in the US, but globally in the highly formulated cannabis products. We want to be a brand leader. That's what Curaleaf is focused on.

My job is to build a great company, a very profitable great company. I personally believe that if you do that, your stock price will reflect what you're doing. And so, I really believe-- and this is not just to say. I do think we're in the second or third inning of a very long game. And I think right now what I need to do is focus on the development of our business, not worry about our stock price.

The stock price will always reflect in open markets in a capitalist economy, which we'll see whether we still have the next couple of years. But if we're in a capitalist economy, I firmly believe that the stock price will reflect the business that we build and that's really what I'm focusing on.

ZACK GUZMAN: And quarter after quarter, you guys continue to build that. Appreciate you coming on here to give us the update. Boris Jordan, Curaleaf Executive Chairman. Thanks again and be well.

BORIS JORDAN: Great being here, Zack. Thanks.