Don’t Get Excited About the Q3 MSO Financial Reports

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

Financial reports for the MSOs start in less than 2 weeks, with Verano reporting its Q3 on the 29th. The following week, Trulieve and Curaleaf among the large MSOs are scheduled to report. The calendar is building, though large player GTI will not be hosting a conference call.

As of the 15th, the Global Cannabis Stock Index is up 1.1% this month, extending upon the massive gain in Q3, and is now up 12.9% year-to-date. MSOs have done much better than other parts of the market, as the American Cannabis Operator Index, at 15.11, is up 80.7% in 2025. MSOS, which is heavily concentrated in three MSOs is up 41.7%. The MSO move, though, has little to do with the fundamental changes and has more to do with the potential rescheduling of cannabis. If cannabis is rescheduled to Schedule III or higher, it will wipe out 280E taxation.

In October, MSOS has gained 12.7%, and the American Cannabis Operator Index is up 16.3%. Here are the returns for each of the 9 members currently:

I haven’t shared the updated the “NCV Revenue Tracker” article that I run ahead of the financial reports yet, but in the last one, which came after the Q2 reports, I suggested that the financial updates failed to impress. I did share some analyst outlooks for the Big 5 for 2025 then, and they are not much higher now for the adjusted EBITDA. In fact, Cresco Labs is slightly lower and is now expected to fall 29%, Curaleaf, which is slightly higher, is expected to fall drop 12%, GTI, also slightly higher, is expected to decline 8%, Trulieve is still expected to slip 1%, and Verano, slightly higher, is expected to fall 6%. Not one of these large MSOs will be growing adjusted EBITDA in Q3. So, the stocks are flying despite falling earnings.

The reasons for the lower projected adjusted EBITDA compared to a year ago are partially due to lower revenue for a few, though GTI has seen a hit to its adjusted EBITDA because of the royalties that it will pay after its brands sale. It is also due to the weakness in the state-regulated cannabis space. It’s not clear why so many state markets are so weak, but the BDSA article from earlier this month about September clearly showed broad weakness. The illicit market and the hemp markets are obstacles, but some of the markets, like Florida, are just maturing and competitive.

Most of the MSOs seem very cheap, but how long cannabis sales remain challenged will play a role on the timing of the recovery in the stocks. Of course, expectations of 280E taxation ending have pushed the stocks up a lot, though they are down a lot from a year ago, except for one:

What’s interesting about one year is that a year ago, MSOs were running up on the expectation that Florida would move to adult-use after the elections, which failed to happen. Voters did approve of it, but the 58% fell just shy of the 60% necessary. The next vote may be in 2026. The average of these stocks is -18.1%, while MSOS has dropped 21.5%. The 6th largest position in MSOS is Glass House Brands, and it has rallied 7.8% over the past year.  Of course, one big MSO has withered, as AYR Wellness is down 98.8%.

So, MSOs are up a lot this year and since the end of June (+160% for the American Cannabis Operator Index and +124% for MSOS), but they are still down over the past year and by a lot more over the past 5 years. If 280E goes away, it should help the fundamentals substantially. If it remains, watch out, as most of the MSOs have balance sheet issues.

The cannabis industry is going through a lot of change. Who expected Target to try getting into the retail of THC beverages? It has been almost a dozen years since the first state opened its doors to the sale of adult-use cannabis, and the federal government and the state governments have not yet figured out regulations or taxation. Investors have lost a lot of money in recent years.  Many companies big and small have been wiped out in America. Still, cannabis remains popular with Americans. Let’s hope that we figure out the taxation and the regulation of the cannabis industry!

Sincerely,

Alan

This week’s newsletter is sponsored by Paul E. Saperstein Co.

On October 29th, equipment from Monster Holdings Group is being auctioned in Jackson, Michigan at the Jackson County Circuit Courthouse at 12 pm ET. All bids must be delivered online. Find out more about the Article 9 Sale of all assets of this extraction company.

Interested parties may contact Paul Cotto at 617-227-6553 or by email at pcotto@pesco.com.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Exclusives

Florida’s Medical Cannabis Market Is Struggling

Michigan Cannabis Sales Sank in September

Mergers & Acquisitions

Vireo Growth Buys $91 Million Schwazze Converts for $62 Million

To get real-time updates, follow Alan on X.com. You can also share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

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