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DECONSTRUCTED: Common Cannabis Capital Cadence
Growth Stage – Private Equity
Private equity investments typically result in either a majority or a substantial minority ownership stake in a company. These generally come with strings attached, which can be wound tightly at times. While private equity offers the opportunity to raise large amounts of capital, it is also often accompanied by a loss of control. In order to amplify returns, private equity firms typically raise a significant amount of debt to introduce leverage into the transaction. This has helped coin the term ‘Leveraged Buyout’.
Documentation: A robust data room as above with PE specific documents that may include supply chain verification, tax and audit, legal reviews, intellectual property opinions and management team background checks.
Final Stage – Public Equity
A substantial increase in liquidity is one of the main advantages of this final stage of liquidity. Other advantages include increasing brand and
prestige, attracting employees with a stock option plan, and making acquisitions with company stock. Going public is no easy task and requires a large absorption of new obligations, including filing SEC reports, getting shareholder approval for corporate actions, additional legal liabilities and other regulations as introduced by the Securities Act of 1933 and its many subsequent amendments.
Documentation: In addition to compliance with Regulation FD and Sarbanes-Oxley, filing and reporting requirements include annual reports, quarterly reports, proxy statements and insider holding filings.