Benzinga: Fear and Loathing in Hollywood, FL
Unlike Hunter Thompson’s book, there weren’t many drug-induced hazes at this week's event. However, there was certainly lots of ruminating over where the nascent cannabis industry is headed.
Below are my obligatory observations and takeaways, gleaned from a variety of MSO & investor conversations plus listening to a solid roster of speakers.
If you are looking for happy people talk or industry cheerleading you might want to stop reading :)
1. Fool me once…
Conventional wisdom expects the imminent passing of Rescheduling, Cole 2.0 and/or SAFER, along with firm ideas of what will be in the reform. With a long history of dashed expectation plus an unknown but expected amount of legislative horse trading, getting any liberalization in 2024 is anything but a done deal - especially with this Congress.
While this non-controversial opinion is not uncommon, there seems to be a lack of Plan B thinking among MSOs. For example what will they do if reform efforts strike out? Does anyone think the Feds will give up hundreds of millions in tax revenues without (including the States) clawing it back somewhere through excise taxes etc?
2. Be all you can be
One expects to hear plenty of happy talk at these events. That’s not necessarily a bad thing. If we don’t really believe in our sector, how will we convince quality talent and capital to come in? This industry remains for the most part in the capital markets wood shed. Equity capital remains scarce while more plentiful debt remains expensive and often onerous.
There's hope for better days, on the backs of solid and steadily improving operating results. Some leaders were even quietly crowing over their firm’s performance. Yet, their job is not done. Sophisticated investors want to see better disclosure, governance structures and investment narratives.
3. Partying like its 2017
Strangely, parts of the industry can’t seem to dispense with outlandish TAM forecasts, ‘first mover’ myths, institutional investor fictions and time to value (i.e. money) fantasies. When it comes to new market or category entry, one can’t help but wonder whether corporate finance principles around ROI or payback are being duly considered.
What was also clear is that improving financial performance is still masking strategic confusion, poor brand performance, and operating model complexity. Many companies need to keep making progress here.
4. 451 Ocean Blvd
Finally, most attendees are understandably optimistic about Florida turning into huge, legal rec market (they also tacitly acknowledge new markets mature in 12-18 months). However, many sensible people also predict a referendum failure – and for some fair reasons. MSOs keen on Florida will need to be clear-eyed, financially prudent and ready with a ‘no vote’ contingency plan.
#Benzinga #MSOs #capitalmarkets #Florida