On Monday (June 25) various hopefuls and established names of the Canadian cannabis industry gathered for the International Cannabis Business Conference (ICBC) held in Vancouver.
Hosted by ICBC, the Vancouver iteration of this event offered a variety of panels of interest for investors of the cannabis space. The Investing News Network (INN) was there at the show attending numerous panel discussions and gaining further insight into the future of the Canadian cannabis space.
“Canada has helped bring cannabis into the mainstream more than any country, first by implementing sensible medical laws, and now by passing the Cannabis Act and ending prohibition for all adults,” Alex Rogers executive producer of the ICBC said in an emailed statement prior to the show.
If you missed the show, don’t worry – below is an overview of the show’s key highlights.
Consulting firm warns cannabis investors on potential bubble
Nic Easley, CEO of 3C Consulting, a strategic advisor for cannabis ventures, warned investors in his panel to be aware of an incoming bubble which will be worse, according to him, than the infamous dotcom bubble of the late ‘90s.
“To call the Canadian public cannabis market a bubble is a third of an understatement, because it’s three times worse than the dotcom bubble,” Easley said.
Despite the gloomy prediction, the consulting firm executive told the room that in his estimation, Canada– in the next two to three years–will be what he called the ‘glory days’ for the public markets.
Like other experts Easley indicated there will come a point where the product produced by Canadian LP’s will be plenty to service the entire Canadian market. These companies will need to diversify quickly in order to stay relevant in the eyes of investors, Easley said.
“If you buy 50 Canadian public companies right now, you are making a huge mistake as an investor,” Easley warned investors as he described the potential impact of a bubble crashing in Canada.
M&A activity strategies
During a panel focused on the recent trend of mergers and acquisition activity in the cannabis space Anthony Holler CEO of Sunniva (CSE:SNN) told the audience his company doesn’t have the same option as some of the larger public players to simply acquire assets and figure out how they integrate into their overall strategy later.
“We can’t do that, that’s impossible for us to do so we have to try and understand the work, understand where the market is going and say ‘we don’t have that skill set,’” Holler said.
Holler added he’s seen through these acquisitions people involved with them don’t end up as part of the transactions. Instead, he said, his strategy is to bring in the people at the center of his acquisition.
“We don’t buy people and then say ‘why don’t you get lost, we don’t need you,’” Holler said of M&A strategy.
Cannabis’ growing presence in public markets
The second panel of the day was hosted by the director of listings development for the Canadian Securities Exchange (CSE), Anna Serin. The CSE seen a rush of cannabis listings thanks to its disclosure-based approach when it comes to US focused companies seeking to raise capital in Canada.
During the panel Serin said the CSE has 71 current cannabis issuers which represent a C$5.5 billion market cap. She told the audience over the past 12 months, CSE-listed companies have raised nearly C$2 billion with 58 percent of it in the cannabis sector.
“One of the biggest concerns from people listing with us was our liquidity, the cannabis sector has shot us through the roof and put us on the map,” Serin said.
Yasmin Gordon, a senior investment advisor for Canaccord Genuity told the room she has noticed a trend of less risk when it comes to financing options for cannabis companies. The entry of Canadian banks into the financing sector for cannabis companies adds to the de-risking trend.
The group of speakers for the CSE-led panel was asked about the high valuations cannabis companies are seeing when a lot of questions remain on the actual size of their revenues and potential legitimate growth.
Arthur Kwan, managing partner with Athena Capital Advisors and CEO of CannaIncome Fund Corporation, said he sees these companies still in the emerging phase with a bulk of their revenues arriving later–but still coming.
Kwan explained when looking at metrics such as revenue and earnings before interest, tax, depreciation and amortization (EBITDA) compared to previous years, prices for these companies start to become “a bit more reasonable… still expensive, but justifiable.”
For more stories coming out of the ICBC show floor be sure to follow @INN_Cannabis for all the latest in the cannabis public market.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.