Despite the lack of a federal regulated cannabis program in the US, companies have been able to steadily grow in the face of adversity. As federal reform appears imminent, one company makes moves to stay ahead of the curve.
For a while now, a variety of financial experts have said the smart money in cannabis finds itself in the US market.
As such, investors are trying to find the differences between multi-state operators (MSOs) and other public cannabis firms.
Finance standards come into play for US operators
There’s a lot of reasons why US cannabis companies want to see federal reform come in to possibly streamline and clean up their process.
According to a representative from an active MSO, cannabis companies have actively pursued operational moves to stay prepared in the face of potential regulation changes.
Rebecca Conti Koar, senior vice president of investor relations with Ascend Wellness Holdings (AWH) (CSE:AAWH.U,OTCQX:AAWH), told the Investing News Network (INN) some of the moves her firm has undergone to stay ready for a new market in terms of finances.
The expert explained that the way the company reports its quarterly financials has drastically changed.
The firm now shares its finances following generally accepted accounting principles (GAAP) instead of international financial reporting standards (IFRS).
“You’re starting to see a lot of our peers switch over and I think almost all of them, with the exception of I think two or three of the top 10, have switched over to GAAP,” Conti Koar said.
According to the online portal of the Harvard Business School, under GAAP “current assets are listed first, while a sheet prepared under IFRS begins with non-current assets.”
GAAP standards prioritize liquidity listing assets based on the ease and speed with which they can be changed to cash.
The benefit lies in complying with requirements for potential senior exchange listings in the US, according to the company representative.
“We’ve been going through the steps to really get our governance in order, so that when it’s time to list, we could comply easily with the NASDAQ or the New York Stock Exchange rules,” Conti Koar said.
Cannabis MSOs can’t yet list on senior exchanges in the US due to the lack of a federal framework around the plant-touching cannabis operators industry within the country.
There have been a few picks and shovels players listed in the US so long as these are not directly growing or selling cannabis.
Due to these rules, only Canadian cannabis companies are allowed to list in the US due to the federal legality of cannabis up the border.
Experts have pointed to the need for MSOs to reach senior exchanges as a way to expose a more mature investor audience to the cannabis opportunity.
Status of federal reform in the US
So far this year there’s been a few critical updates to the path for cannabis reform coming from the feds.
The Cannabis Administration and Opportunity Act was introduced in the Senate this summer; the bill would remove cannabis from the Controlled Substances Act (CSA) list of monitored drugs, among other changes.
However, it’s difficult to project where the bill will go on the Senate floor as there’s been little to no bipartisan agreement surrounding cannabis reform.
At the state level, however, it’s been an exciting year for the cannabis market, with New Jersey opening the state to adult-use sales. This could create a pressure domino effect for the northeastern part of the country.
Despite the progress at the state level from existing markets and new ones opening up, James B. Francis, chief research officer at CRB Monitor, recently told INN companies are struggling from the lack of a federal framework.
Investor takeaway
Operators in the US cannabis market are at the same time pressured to continue operating and focusing on their business strategies at the same time expectations and planning for a potential reform time for the entire industry.
Investors will have to closely watch how cannabis companies operate leading up to and following a potential change in the cannabis law of the land.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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