By Exec Edge Editorial Staff
Once upon a time, in the pre-legalization days of Canadian cannabis, one of the more talked about subjects was whether alcohol companies would elect to partner with licensed producers (LP). Global alcohol conglomerate Constellation Brands kicked off the debate with it’s first investment in Canopy Growth in October 2017. But the drama soon spread to competitors such as Aphria Inc. (now Tilray), where former top Diageo Canada executive, Jakob Ripshtein, was President. Although Diageo Canada ultimately did not partner with any LP then or since, Jakob Ripshtein finally got his Big Alcohol partnership—if on a smaller scale.
On November 15, Humble & Fume completed an US$8 million private placement from Green Acre Capital Distribution Corp., which intends to establish a joint venture to engage in the business of cannabis distribution in the United States—initially in California. The deal brings in Johnson Brothers, a Top 5 leading wine, spirits, and beer distributor, into the mix pursuant to the terms of the First Option. This option grants Johnson Brothers the right to acquire considerable Humble & Fume equity for nominal consideration once cannabis has been federally legalized in the United States.
At the time of the deal, Jakob Ripshtein was a member of Humble & Fume’s Board of Directors. Since then, his role has expanded ever further.
On November 30, Humble & Fume announced the appointment of Jakob Ripshtein as Chairman of the Board, succeeding outgoing Executive Chairman Shawn Dym. Jakob will be tasked to focus the Board’s attention on strategically important issues and to foster policy cohesion and strategic oversight. U.S. expansion is high on the list, with Jakob stating, “As the company expands into cannabis distribution in the U.S., we are well positioned to deliver long-term shareholder value.”
Clearly, this is where Johnson Brother’s large network of retail partnerships comes into play. Humble & Fume is looking ahead to the time where cannabis is federally legal. When that happens, cannabis can be fully distributed throughout the domestic retail supply chain. Furthermore, cannabis products and alcoholic beverages could eventually be distributed together, creating a substantial opportunity to quickly increase Humble & Fume’s distribution channels.
The promotion of Jakob Ripshtein is Interesting timing for the man who assuredly threw his support behind the Green Acre Capital-Johnson Brothers association. With the deal now consummated, Jakob has stepped into a hands-on executive operations role and will eventually oversee this alcohol-cannabis nexus.
Cannabis Normalization Drumbeats Grows Louder
Although Johnson Brothers involvement is contingent on the sufficient federal legalization of cannabis, the U.S. cannabis industry took a significant step towards that goal—even if key legislation in the Senate ultimately fell short.
The SAFE Banking Act, which sponsors had attached to a mainline bill called the National Defense Authorization Act (NDAA) as an amendment, was until recently under consideration in the U.S. Senate. Far from being attached to a Bill that may never receive a floor vote, annual ratification of the NDAA is a slam dunk in political terms, having passed each year since 1971.
While it appears Senate Democrats wrestled the initiative from House Democrats out of the NDAA conference process, SAFE did have widespread bi-partisan support—including from ranking Senators in the Senate Armed Services Committee. Senate Majority Leader Chuck Schumer, who introduced his own more encompassing piece of cannabis legislation in July, has always wanted more inclusive social justice reform in any federal legislative package.
Had SAFE Banking been included in the NDAA, it would have marked a major milestone towards the normalization of cannabis-related business activities. Its cannabis language held that several important banking and transactional-related activities would have become normalized, including:
- The general prohibition of a federal banking regulator from penalizing a depository institution for providing banking services to cannabis-related businesses
- Restricts the termination or limiting of deposit insurance or share insurance of a depository institution for providing financial services to cannabis-related businesses
- Shields cannabis-related businesses from punitive anti-money laundering laws and asset forfeiture
- Could have positive effects on business activities such as the allowance of credit for cannabis-related purchases and exchange uplisting for public companies
In a recent interview with The Dales Report, foremost cannabis political insider, Brady Cobb, was optimistic about Safe Banking chances of passing. He stated: “This is the best shot on goal we’ve had, whether it happens, we are now elevated. The best news, I think investors need to take solace in assuming if it didn’t happen—which I’m very bullish and a firm believer—but cannabis is now a Tier-1 issue in Washington, DC. Welcome to the big kids table.”
Although SAFE Banking passage is practically dead, it still has an outside chance of being included in the NDAA. Bill sponsor Rep. Ed Permutter tweeted out on December 7 that as a result of the committee’s decision to exclude SAFE Banking, he plans on filing “an amendment to the NDAA at the Rules Committee which would add #SAFEBanking back to the bill.”
Regardless of whether SAFE Banking is ultimately included in the NDAA, the drumbeats of cannabis legalization continue to grow louder. If it passes, the industry receives a significant win that will make the next regulatory goal—outright legalization—more plausible. If not, expect Chuck Schumer to reintroduce his Cannabis Administration & Opportunity Act next year, which goes even further.
In the meantime, Humble & Fume will continue executing on its business operations, patiently waiting for regulatory barriers in the U.S. cannabis industry to come down. When they do, the company has the perfect partner to expedite extensive distribution throughout the United States, where cannabis should one day retail on an equal footing with alcoholic beverages.
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