The SAFE Act Could Lead To Big Changes In The North American Cannabis Industry.
https://seekingalpha.com/article/4251361-safe...s-industry
Summary
•The SAFE Banking Act is headed to the House Financial Services Committee on Tuesday.
•The SAFE Banking Act, if passed, would allow big US banks to provide banking services to cannabis companies.
•It's possible that the SAFE Banking Act could be expanded to affect exchange listings, allowing US cannabis companies to list on the major exchanges.
•These changes are good for some players and bad for others.
Important legislation for the U.S. cannabis industry is coming. On Tuesday the House Financial Services Committee is scheduled to review and mark up a draft of what is being called The Secure and Fair Enforcement (SAFE) Banking Act. The SAFE Banking Act has several significant implications for the cannabis industry.
Banking Services
The main purpose of the SAFE Banking Act is to protect banks from being prosecuted by the federal government for servicing the cannabis industry. See here for the draft text of the bill. This would have far-reaching implications in the US for the cannabis industry. For one, it would allow major banks to provide bank account services, which will lower operational costs as companies could then easily get bank accounts and make transfers. More importantly, the SAFE Banking Act would allow large US banks to provide debt financing to cannabis companies, which would lower the overall cost of capital for an industry that has had to rely to a large extent on equity or equity-linked financing.
These changes will benefit the industry generally, but there are some companies it may hurt. For example, cannabis REITs like Innovative Industrial Properties (IIPR) currently offer the industry a form of debt financing through sale-and-leaseback transactions of the land and facilities where the marijuana is grown. As more traditional bank financing becomes available, REITs like IIPR won't be the only game in town anymore and will likely have to adjust their pricing to be competitive.
Stock Listings
The current listing situation is a mess. US companies are not allowed to list on the major US exchanges, so they list on Canadian exchanges or over the counter in the US. Meanwhile, Canadian companies are able to list on the US exchanges. Obviously, there is a big premium in being able to access US investors and the publicity and legitimacy that a US listing brings. The result has been that Canadian companies have used their access to the US exchanges to become the best known and largest cannabis companies in the world. These companies have no US operations and pay no US taxes, yet have benefited enormously from their access to the US capital markets. Meanwhile, actual US companies are shut out of the US capital markets and have been forced to list in Canada.
https://seekingalpha.com/article/4251361-safe...s-industry
Summary
•The SAFE Banking Act is headed to the House Financial Services Committee on Tuesday.
•The SAFE Banking Act, if passed, would allow big US banks to provide banking services to cannabis companies.
•It's possible that the SAFE Banking Act could be expanded to affect exchange listings, allowing US cannabis companies to list on the major exchanges.
•These changes are good for some players and bad for others.
Important legislation for the U.S. cannabis industry is coming. On Tuesday the House Financial Services Committee is scheduled to review and mark up a draft of what is being called The Secure and Fair Enforcement (SAFE) Banking Act. The SAFE Banking Act has several significant implications for the cannabis industry.
Banking Services
The main purpose of the SAFE Banking Act is to protect banks from being prosecuted by the federal government for servicing the cannabis industry. See here for the draft text of the bill. This would have far-reaching implications in the US for the cannabis industry. For one, it would allow major banks to provide bank account services, which will lower operational costs as companies could then easily get bank accounts and make transfers. More importantly, the SAFE Banking Act would allow large US banks to provide debt financing to cannabis companies, which would lower the overall cost of capital for an industry that has had to rely to a large extent on equity or equity-linked financing.
These changes will benefit the industry generally, but there are some companies it may hurt. For example, cannabis REITs like Innovative Industrial Properties (IIPR) currently offer the industry a form of debt financing through sale-and-leaseback transactions of the land and facilities where the marijuana is grown. As more traditional bank financing becomes available, REITs like IIPR won't be the only game in town anymore and will likely have to adjust their pricing to be competitive.
Stock Listings
The current listing situation is a mess. US companies are not allowed to list on the major US exchanges, so they list on Canadian exchanges or over the counter in the US. Meanwhile, Canadian companies are able to list on the US exchanges. Obviously, there is a big premium in being able to access US investors and the publicity and legitimacy that a US listing brings. The result has been that Canadian companies have used their access to the US exchanges to become the best known and largest cannabis companies in the world. These companies have no US operations and pay no US taxes, yet have benefited enormously from their access to the US capital markets. Meanwhile, actual US companies are shut out of the US capital markets and have been forced to list in Canada.
