Highlights from a series of MasterClasses in cannabis investing, focusing on investing truths, descheduling, cash flow over EBITDA, financial struggles in the industry, complexities of cannabis investing, importance of profitability per share, significance of e-beta accretive, interest rates impact, investment advice for the cannabis sector, and understanding goodwill and intangible assets.
Focus on descheduling cannabis is more critical than banking act lobbying.
Cash flow management is crucial for sustainability and growth in the cannabis industry.
Deep dives
Misguided Focus on Banking Act
There is a misguided focus within the cannabis sector on lobbying for the banking act as a solution. The main issue lies in getting cannabis removed from the scheduled substance list. Simply tackling this fundamental problem would be more beneficial than the proposed banking act, according to discussions in the episode.
Challenges in Cash Flow for Cannabis Companies
Cannabis companies are facing challenges related to their cash flow. The need for sufficient cash reserves is emphasized, as many companies are considered serial issuers due to their continuous need for funding. Analysts highlight the importance of having adequate cash for sustainability and growth.
Debt vs. Stock Issuance for MSOs
The discussion delves into the strategy of issuing debt versus stock for multi-state operators (MSOs) in the cannabis industry. There is debate over the risks associated with high-interest debt and the potential benefits of using stock as currency for acquisitions and market expansions.
Crucial Evaluation of EBITDA and Growth Metrics
The podcast challenges the over-reliance on EBITDA and superficial growth metrics in evaluating cannabis companies. Critical analysis is emphasized, focusing on cash flow, net income, and shareholder value on a per-share basis rather than generic growth numbers and misrepresented EBITDA indicators.
James Baker and Julian Lin are two standout analysts who have joined us over the years for 3 MasterClasses in cannabis investing. This is a compilation of highlights from those shows. As the last episode of the year, and as we've been met with more political gridlock and disappointment, we would do well to remind ourselves of some investing truths, let go of outdated hopes and focus more on descheduling than banking reform. On the crash that came, uplisting, internal and external growth, goodwill and intangible assets and why cash flow is more important than adjusted EBITDA.
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