Cannabis Sector Re-Rating Is Imminent
The cannabis industry is entering a new era. In this episode of Trade To Black, presented by Flowhub, host Shadd Dales and Anthony Varrell sit down with Seth Yakatan to break down the seismic shift underway following the DOJ’s final ruling on cannabis rescheduling from Schedule I to Schedule III. We’ll unpack what this landmark decision means for the re-rating of cannabis equities, operator margins, and the broader capital markets landscape.
We kick off with a developing story out of North Carolina, where state lawmakers are beginning to take medical cannabis legislation more seriously in the wake of recent movement from Washington. North Carolina sits on top of a $3 billion illicit market, making it a potentially significant opportunity should a bill advance.
Next, we dive into a newly released research report from ATB Capital Markets, a Calgary-based institutional bank with a long history of covering the cannabis sector. Cannabis consultant and investor Seth Yakatan breaks down the report’s key findings. ATB modeled a so-called split system in which medical cannabis could receive relief from the IRS’s 280E tax provision while adult-use operations remain fully exposed. The bank also reduced its discount rates across the sector by 100 basis points, signaling a view that the risk profile of cannabis businesses is materially improving.
When it came to identifying winners under the new framework, all three agreed that Kim Rivers and Trulieve stand out clearly, given that approximately 85 percent of Trulieve’s business is medical, and the company carries a substantial uncertain tax position on its balance sheet. Curaleaf was also highlighted, both for its medical exposure and its already-established international footprint in Europe. Yakatan predicted that the 280E relief alone could represent a $100 million net income swing for Trulieve in 2026, moving the company from a net loss to profitability.
Looking at the broader landscape, the group discussed the growing likelihood of major mergers between tier-one multi-state operators, with Yakatan identifying Verano and Cresco as potential acquisition targets and noting the geographic complementarity between Trulieve and Curaleaf. Glasshouse Brands was discussed at length as a company built for the long game, particularly regarding interstate and international exports, given its exceptionally low cost of production out of California.
You don’t want to miss out on what might happen after the re-rating of cannabis. This and more when you tune in.
