At the Benzinga Cannabis Capital Conference Thursday, a panel of cannabis industry experts discussed the nuances of the cannabis debt market.
The panel discussion included John Lykouretzos, CEO of FocusGrowth Asset Management; Travis Goad, managing partner at Pelorus Equity; Jack Mascone, head of capital markets at Seaport Global (NASDAQ:SGIIW); and Len Tannenbaum, CEO of AFC Gamma Inc (NASDAQ:AFCC).
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Investing Strategies: Lykouretzos said the first thing he would ask any potential cannabis investor is what their goals are.
"Direct investments into private cannabis companies in '16, '17, '18, '19, those ended badly for a lot of people, so I would not want to be a single family office investor, passive and illiquid, providing money to the cannabis sector," Lykouretzos said.
"What I would tell you, depending on what your goals are, we saw the greatest opportunities over the last couple of years in credit–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 do not manage risk appropriately.
"You have to understand the cash flows. You have to understand and add back the leases … There's a lot of nuances to this category, so I don't think this is for people who aren't really steep in it," Tannenbaum said.
Assessing Cannabis Companies: Mascone said a key component in assessing a cannabis company looking to raise money is the quality and philosophy of the management team.
"The management teams that have a responsible view for their business going forward, when they're employing debt in their capital structure, it's a pretty tricky proposition when you think about the dynamic situation of the regulatory and legal environment, a lot of which people can't control right now," Mascone said.
Cash flows, licenses and real estate are the three basic cornerstones of assessing any cannabis company. Goad said the first thing Pelorus looks at is real estate value.
"We're very focused on the 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 to find relationships that we can grow over time and do multiple deals with," Goad said.
Learn more about this and other upcoming Benzinga Cannabis events at this link.
Jack Mascone of Seaport Global Securities speaks during a panel discussion on the cannabis debt market Thursday at the Benzinga Cannabis Capital Conference in Miami Beach. Photo by Dez Smith.