Management
By definition, highly experienced cannabis operators have worked in unlicensed, unregulated and illegal environments. You invest in management teams when you invest in companies, and it is paramount that trust is based on claim verification.
It is important to conduct background checks on any beneficial owners of your investment target and also ensure that any prior cannabis convictions don’t disqualify the business from obtaining necessary licensure.
Valuation
Public cannabis markets exhibit high volatility and generous valuations. Private market data is difficult to access and aggregate, while the abundance of non-cash transactions further complicates value assessment.
Optimistic expectations on conservative assumptions are an advisable combination when determining potential investment return. The tendency to overpay is strong and often punished by volatility driven emotion.
Accounting
Banking remains an issue for the industry. The lack of available banking options encourages questionable accounting practices which can have an adverse impact on recorded corporate value.