Cannabis stocks have been on the move again over the past two weeks for a very simple reason: The U.S. House of Representatives is about to vote on the contentious but promising MORE Act this week – possibly today.
The Marijuana Opportunity, Reinvestment and Expungement Act (the “MORE Act”), sponsored by House Judiciary Committee Chairman Jerrold Nadler (D-NY), effectively targets the removal of cannabis from the federal list of controlled substances.
It wouldn’t make cannabis legal everywhere. But it would mean that the decision would be up to states, and it’s widely thought that would be a step that spurred a gold rush for new revenues among states by removing the stigma attached to cannabis.
But that isn’t the only cannabis-related bill on Capitol Hill in the spotlight. The Secure and Fair Enforcement (SAFE) Banking Act (H.R. 1996), sponsored by Rep. Ed Perlmutter (D-CO), is also up for a vote. This one is in the Senate and has bipartisan sponsorship – Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT), along with 180 cosponsors.
SAFE aims to shield financial institutions from repercussions if they take on banking relationships with cannabis businesses that are operating properly within state cannabis laws. The SAFE Banking Act is not expected to pass the Senate, though stranger things have happened on the Hill. However, SAFE becomes moot if MORE gets through because MORE would eliminate the federal need to go after banks operating according to state cannabis statutes.
In other words, cannabis stocks are on fire because the general notion of legislative momentum inevitably leading to some form of US legalization is back in gear. That momentum can be seen across the space.
Just take a look at a basket of key cannabis stocks like Tilray Brands Inc. (Nasdaq:TLRY), Aurora Cannabis Inc. (Nasdaq:ACB), GrowGeneration Corp. (Nasdaq:GRWG), Sundial Growers Inc. (Nasdaq:SNDL), HEXO Corp. (Nasdaq:HEXO), Curaleaf Holdings Inc. (OTC US:CURLF), and AdvisorShares Pure US Cannabis ETF (NYSEArca:MSOS).
Most of these stocks are up anywhere from 25-100% in the past two weeks.
But there are some stocks with clear ties to the space that haven’t been found yet by the crowd. One in particular deserves a closer look given its recent announcement to create an entirely new business model in the cannabis marketplace: Sugarmade Inc. (OTC US:SGMD).
A New Model for Cannabis Sales
Sugarmade Inc. (OTC US:SGMD) currently operates a cannabis delivery business with cultivation and product manufacturing coming into place to round out a fully vertical model.
To help build that model out, the company is getting ready for the first planting at its large 640-acre outdoor cultivation site associated with its recently acquired Lemon Glow subsidiary. But there’s more here than growing sales and verticalization.
One of the most interesting parts to the SGMD story is its announcement yesterday to double its delivery business and partner with an expanding reservation-only restaurant brand in the LA metro region that has an adjacent private event space which will include on-site cannabis consumption.
Sugarmade’s new delivery hub will be located on the world famous Sunset Strip in West Hollywood. That gives it a new affluent footprint that won’t overlap with its existing delivery business.
But its agreement to become the exclusive provider of cannabis goods for on-site consumption at a growing restaurant chain is inspired. As far as we can tell, no one else is doing this. It’s a new model with potentially enormous implications for the industry. And SGMD is out in front.
“This investment lands us on the ground floor of a new concept for cannabis distribution in the world’s biggest cannabis marketplace,” stated Jimmy Chan, CEO of Sugarmade Inc. (OTC US:SGMD).
According to the Agreements, Sugarmade will take in one hundred percent (100%) of all profits from the new Delivery Hub until the Company has made back all its capital investment, after which time the Company will take in 51% of all profits from this Delivery hub location going forward.
In addition, Sugarmade teamed up with Boulevard Hospitality Group to be its first choice provider of cannabis for BHG’s expansion into its future cannabis-only venues – BHG is of course best known for operating Yamashiro, the iconic Hollywood Hills restaurant for over 100 years.
Chan added, “Through these Agreements, we are simultaneously adding a new cannabis end market with future growth potential, doubling our delivery coverage in the LA metro area, and creating a new and more diversified revenue profile. We believe all of these steps represent strong potential drivers for shareholder value.”
SGMD has been flying under the radar. But the recent juice in the cannabis space and the impending major votes on Capitol Hill will likely draw in many more eyeballs. The company is expanding in innovative ways at just the right time and may be poised to make up significant ground.
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