(Editor’s note: Danny Moses will provide the keynote presentation at the Investor Intelligence Conference Dec. 9-10 as part of MJBizCon Week in Las Vegas.)
Danny Moses is an adviser at New York-based cannabis investment group Merida Capital Partners and founder of Moses Ventures, an investment fund in Connecticut.
Moses gained fame thanks to the 2015 release of the Oscar-nominated film “The Big Short,” based on Michael Lewis’ book, which depicted the role Moses and his colleagues played in predicting – and capitalizing on – the collapse of the U.S housing market and the credit bubble in 2007-08.
Now, Moses is largely focused on cannabis investing, which he sees as a “Big Long” play.
Marijuana Business Daily spoke with Moses about his investment philosophies in advance of his keynote address next week at the Investor Intelligence Conference, which runs in conjunction with MJBizCon.
You’ve talked before about the political and economic tailwinds the cannabis industry faces as a fundamental reason to get involved and invested in the space. Can you expand on that?
Ninety percent of Americans support medical marijuana and 65% approve of recreational (sales).
If you are a politician, this is a rare instance where an issue crosses into both parties and you’d better have a good reason not to like it if you want to get re-elected.
In addition, in a budget deficit environment, there is job growth and opportunity crossing into every sector – health care, CPG (consumer packaged goods). (Marijuana) really has its fingers in everything.
What are some other interesting fundamentals of the industry that should make it a long-term investment play?
You have the ability to build your companies from scratch – this is an industry which can really check all the boxes in terms of women and minority involvement.
It’s also really hard to find a more positive industry in terms of regulation.
Cannabis (also) can become completely ingrained in society as a treatment or wellness option – it can affect the everyday lives of people.
What about the involvement, potential or otherwise, of Big Alcohol, Big Tobacco and Big Pharma in this industry?
With alcohol sales dropping, these companies are doing this (investing) as a defensive move. They are going to continue to see cannabis as a threat to them.
(As for pharma) you can be pretty sure that any of the negative rhetoric in Washington DC is financed by the pharmaceutical industry. They are very nervous, but they want to figure out how to be involved.
What are some of the shorter-term concerns regarding investment in the industry?
I think you are going to see many (M&A) deals repriced or renegotiated as these deals were struck when the market was 50% to 70% higher.
Then you have the vaping crisis thrown into the middle of all of this. Some of these companies will have no choice. It is going to depend on who is in the strongest position.
Also, banking issues and access to capital, which is choppy. There is a lot of irony in (BNY Mellon’s move) after the SAFE Banking Act.
Who is going to step up for that? This is not a sustainable (banking) environment. It is in the micro where things get lost.
What if there is federal legalization? Will that be welcomed by everyone who has so far set up their operations based on a lack of interstate commerce?
There will be a drop in the price of flower, but it will take a long time to get the (interstate) infrastructure in place. However, there will be other areas of growth, which could be endless.
The immediate economies of scale will be a great problem to have. Insurance companies will have the ability to reimburse, and 280E (of the U.S. tax code) would no longer be the case.
What are some of the lessons you learned from “The Big Short”?
There are two things.
During a downward move, don’t believe anything anyone tells you – it can always go lower than you think. People are always going to paint a rosy picture, and you have to do your own work.
Then, companies that are overcommitting on their capital spend without a real mechanism to execute. Many of these companies should not have gone public in the first place, but it’s not really their fault. The infrastructure wasn’t built yet.
The capital deals had built in changes in lending laws or that stock prices would stay elevated. Future forecasts are going to depend on what the access to capital (really) is.
This interview has been edited for length and clarity.
Nick Thomas covers financial news for Marijuana Business Daily and can be reached at email@example.com