ATB Cannabis Investor Sentiment Survey

Note: Our survey was conducted from September 21 to September 29. Therefore, it did not capture the impact of the September 29 Stay Order ruling (here), released after market, wherein the Chief Administrative Law Judge (ALJ) effectively paused the cannabis rescheduling process for a minimum of two weeks. 

The ATB Take:
(1) Optimistic on Rescheduling, Uplistings, and Hemp Ban:
Investors remain generally bullish on near-term sector catalysts. Respondents assigned a 65% probability to full cannabis rescheduling materializing in the next six months (a figure we believe would be slightly lower today considering the recent delay). Respondents also assigned a 67% probability to broader sector uplistings to major US exchanges, marking the first time in our survey's history that uplistings crossed the 50% threshold. This shift is likely attributable to the recent uplistings of Trulieve and Glass House, which reinforced investor confidence that rescheduling could unlock broader exchange access. Additionally, respondents assigned a 58% probability to a federal intoxicating hemp ban taking effect. 

(2) Hemp Ban Still Underappreciated:
Rescheduling and uplistings were cited as the top two factors that would increase investors' willingness to allocate more capital to MSOs, with the hemp ban ranking lower. We believe the potential materiality of a federal intoxicating hemp ban remains underappreciated by most investors. A hemp ban could significantly accelerate organic industry growth, supporting top-line expansion, improved profitability, and multiple expansion. 

(3) M&A in the US Gaining Importance:
Respondents believe that debt repayment should be the top capital allocation priority for MSOs, which is in-line with prior surveys. However, preference for M&A rose significantly from prior periods, now ranking as the second-highest priority. We believe M&A and industry consolidation have re-emerged as core themes due to distressed assets coming to market across multiple states, alongside expectations that higher post-rescheduling equity valuations will facilitate transactions. 

(4) Rescheduling Was Expected to Happen Before the Midterms:
A large majority of respondents (70.6%) believed cannabis would be rescheduled ahead of the midterm elections. While we view this timeline as off the table now, these data highlight the expectations prior to the recent rescheduling delay. (5) Upside Potential Remains: Nearly half of investors (46.7% vs. 46.2% prior) believe the MSOS ETF will reach $10 or above, while 37.5% (vs. 61.5% prior) view a fair forward EV/EBITDA multiple for Tier 1 operators as 10x or higher following rescheduling. While these data indicate that rescheduling is far from fully priced in, recent surveys show a gradual moderation in upside expectations and price anchoring toward lower levels. 

(5) Positive Sentiment in Canada, but Institutional Interest Remains Low:
Only a minority of survey respondents demonstrated active interest or investments in Canadian operators, despite what we view as a significant improvement in fundamentals for certain operators. Among those investors with exposure, 40% reported feeling more bullish compared to six months ago, with none becoming more bearish. Investors still cited improving fundamentals as the main driver for increasing capital allocation to Canadian cannabis.

(6) Consensus Picks:
In the US, Green Thumb is the top consensus long, followed by Trulieve.

In Canada, Village Farms and Cronos are the consensus longs.

NOTE: All figures in US$ unless otherwise specified. 


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