EXCLUSIVE: Cannabis debt market executives talk about investment opportunities, ‘equity-like returns without the equity risk’
At the Benzinga Cannabis Capital conference on Thursday, a panel of cannabis industry experts discussed the nuances of the cannabis debt market.
The roundtable included Jean LykouretzosCEO of FocusGrowth Asset Management; Travis Goadmanaging partner at Pelorus Equity; Jack MasconeHead of Capital Markets at Global Seaport SGIIW; and Len TannenbaumCEO of AFC Gamma Inc. AFCC.
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Investment strategies: Lykouretzos said the first thing he would ask any potential cannabis investor is what their goals are.
“Direct investments in private cannabis companies in ’16, ’17, ’18, ’19, those ended badly for a lot of people, so I wouldn’t want to be just a family office investor, passive and illiquid, providing money to the cannabis industry,” Lykouretzos said.
“What I would tell you, depending on your goals, we’ve seen the biggest opportunities over the last two years in credit and equity-like returns without the equity risk.”
Tannenbaum said the cannabis industry is a very exciting opportunity for investors, but it’s also extremely dangerous for investors who don’t manage risk appropriately.
“You have to understand the cash flow. You have to understand and add the leases… There’s a lot of nuance in that category, so I don’t think it’s for people who aren’t really diligent,” Tannenbaum said. .
Cannabis Business Ratings: Mascone said a key element in evaluating a cannabis company seeking to raise funds is the quality and philosophy of the management team.
“Executive teams that have a responsible view of their business going forward, when they use debt in their capital structure, that’s a pretty tricky proposition when you think about the dynamic situation of the regulatory environment and legal, which a lot of people can’t control right now,” Mascone said.
Cash flow, licensing, and real estate are the three cornerstones of valuing any cannabis business. Goad said the first thing Pelorus looks at is real estate value.
“We’re very focused on asset value, but it’s also the management teams and what we think they’re going to be able to do and accomplish. We really like finding relationships that we can grow over time and do multiple transactions with,” Goad said.
Learn more about this and other upcoming Benzinga Cannabis events at this link.
Seaport Global Securities’ Jack Mascone speaks during a panel discussion on the cannabis debt market Thursday at the Benzinga Cannabis Capital conference in Miami Beach. Photo by Dez Smith.