Cannabis investors have trekked through a difficult 2021 period, but US expansion plans and better market conditions may aid the industry, according to experts at a business conference.
The Lift Expo made a return to the city of Toronto in November, marking the first time an event like this has happened again since the start of the COVID-19 pandemic.
As is tradition with the event, the first day was dedicated to the Lift Cannabis Business Conference.
Conversations on flow of capital
As with many previous editions of the Lift Cannabis Business Conference, the conversation surrounded capital: its origin, its direction and where to find it right now.
“Capital is like the wind … it follows opportunity,” Amanda de Freitas, CEO of Cannaceutical Canada, said during a panel titled “What it Takes to Secure New Funding Today and How to Raise it Fast.”
Vahan Ajamian, capital markets advisor High Tide (NASDAQ:HITI,TSXV:HITI), said capital can be finicky to lock down, and more often than not it becomes available in a different way than a company may want it.
Ajamian, who also previously served as a cannabis stock market analyst, said the gravitational pull of US reform efforts will help to eventually unlock new forms of capital.
When asked how companies should try to stand out in the minds of investors and those looking to deploy capital in the space, Nick Kuzyk, principal at Meadowbank Strategic Partners, said it’s all about EBITDA.
“Nobody cares anymore about how good your top-line revenue in this space is, because of ‘been there, done that,’” Kuzyk said. “Now it’s about multiples to EBITDA and path to EBITDA that you think you can deliver for an investor.”
Takeaways from cannabis business experts
As part of a conversation titled “What Has Canada Achieved and What Are the International Prospects Today?,” Ashley Chiu, strategy and transactions management consultant at EY-Parthenon within EY Canada, said there’s been approximately 40 percent growth on a year-over-year basis for the domestic marketplace.
According to Chiu, the market’s maturation has helped analysts and investors better evaluate companies since financial reports are more thorough and show a bigger picture than what was previously available.
The EY Canada expert said international opportunities may be more readily available to Canadian cannabis operators, but at this moment the market seems a bit lukewarm on these ventures.
In a conversation with the Investing News Network, Chiu said that while 2021 offered financial hardships in the stock market, she saw a resurgence of interest attached to the potential for the cannabis market.
“Stakeholders that are getting involved and talking about the potential, the opportunity and just that reinvigoration and continued progress — I thought was really, really important,” she said.
The potential from a changing regulatory landscape in the US has proved to be a key aspect for this sentiment resurgence, Chiu said. “I think the promise of US legalization definitely helped drive a lot of that interest.”
Canadian legacy amid US expansion plans
A panel that included some legacy stakeholders in the Canadian cannabis business sector honed in on the opportunities found in the US and how Canadians can best tap into them.
The panel included Bruce Linton, co-founder and former CEO of Canopy Growth (NASDAQ:CGC,TSX:WEED) and current chairman of the advisory board of psychedelics firm Red Light Holland (CSE:TRIP,OTC Pink:TRUFF). Linton is a notorious figure in the cannabis investment market.
A few of the panelists made a curious proposition on how to evaluate the US opportunity, describing Canada as another state in the overall US marketplace map. The idea stirred a debate on the real applications of this concept.
Overall the point was clear: All eyes are on the US right now.
When discussing the potential for US legalization to take hold in the near future, Linton explained he foresees challenges ahead. “It’s going to be a gong show,” he said. The Canadian cannabis expert said there will be clashing interests between state and federal authorities looking to regulate and benefit from cannabis sales.
John Fowler — current president of craft grower Muskoka Grown and former CEO of the Supreme Cannabis Company, which was a publicly traded cannabis producer acquired by Canopy Growth — said he expects to see many state markets in the US end up as net losers if there is federal regulation at some point.
“The current environment is optimized for the people in this room, meaning it’s fractured. Because what happens when federal regulation happens? ‘Oh, we’re so excited the government is here to make something better that’s already working.’ Walk me through that one,” Linton added to laughter from the audience.
The business of cannabis in Canada has undergone significant changes since the onset of the COVID-19 pandemic. The return of the Lift Expo marked another change as the market settles into a desire to complement domestic sales with international ventures, specifically those found in the US.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.