Assessments of cannabis companies are at phenomenal heights, often for assessments before they fall.
5 minutes read
The views expressed Green businessman Shareholders are their own.
When you have a seat in the front row to blossom the industry and bust – stick to yours. I worked in institutional stocks in early 2000 and saw the rise and fall of the young Internet. Today, I am the chief operating officer of the Grand Hemp Company. From where I sit, it is easy to hear some of the echoes of the troublesome days in the current cannabis market.
Since July, we have had over a billion dollars of cannabis deals, and a lot in the range of one hundred million dollars. Just as in bad old days at the beginning of the 21st centuryStreet Century, everyone looks to buy or sell.
At that time, a large part of my work was the sale of IPOs and secondary salaries. Just like the legal landscape of cannabis today, it was a completely new industry understood by only a few people. At first, many investors saw from the sidelines. The new companies did not match the old ways of building value, so mutual funds remained mutual with vanilla. Why invest in a business that did not plan to show profits for the first five years? Instead, hedge funds bought many of the early dotcom deals and became very rich.
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Very soon, people were crazy about anything that dot.com says. Everyone has two or three deals a week. But realistically, this is very much for any company. In the end, we saw a lot of overburdened deals in the group of exhausted investors, lawyers, bankers and businessmen pushed to make more and more deals occur.
Similarities in the cannabis market are strange. Hemp today is also a very misunderstood industry. Many people still think of the stereotype of someone accustomed to selling herbs from behind his car. It is difficult to predict future gains because the mixture of rules makes the industry particularly complex.
But the reality is that today's cannabis entrepreneurs are sophisticated entrepreneurs successfully crossing a market where the main product is legal in two-thirds of the states but illegal at the federal level. This separation means that large companies have not come down to the cannabis industry in large numbers – so far. But it is only a matter of time, which is a large part of the reason for the rise in M & A activity.
My inner feeling – based on what happened then and what we are hearing now – is that we will get a certain level of fatigue in dealing with cannabis within the next six months. Fortunately, we've passed this before and hope to learn a lesson or two. The following are five lessons that entrepreneurs and investors in the continent must take into account to ensure that they avoid the mistakes of the dot com era.
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Good companies can be lost in dodging.
I've seen a lot of powerful companies crumble because they waited a long time to sell them – and misread tea leaves that showed that the market was about to heat up. Timing is everything and time is now. There will be a lot of big companies coming to the market and a lot of money around the world are looking to jump.
If you are an investor, suppose cannabis stocks will be incredibly volatile for a while and act accordingly. We will look at companies that are rising by 10% per day. If you do not have the stomach for it, it is not the right time to enter the game.
Do not approach pricing.
Companies have become very nice and have missed much more opportunities. Your company may deserve what investors want to pay for it. Do not hold on to some magical assessments that you know do not actually reflect what you sell.
Keep costs down.
When the market starts to appear like a madman feeding on sharks, it's tempting to throw money at the bells and whistles that do not actually add to the minimum to distinguish yourself. Avoid this trap. Investors are smart – they want to see fiscal discipline, not just a bunch of surplus.
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Do not rule out the chance of integration out of reach.
Suppose everyone is talking to everyone right now. People really are just trying to figure out if different companies fit their personality. The right chemistry can create a new company with much greater value than you can sell today. There is something to be said about being part of a billion-dollar conglomerate.
By knowing our history, we have the luxury of not repeating it. The cannabis industry is still young and exciting and growing rapidly. We do not need a dot com boom to show the real value in these new companies.