Elevating your cannabis share price
Profit is not the only thing that matters
It’s common knowledge that MSO & LP stock prices are in the toilet. Much of this disappointing performance traces to weaker than expected operating results and negative feelings around the industry. But do EBITDA results, market growth rates etc explain the entire story? No.
Low shareholder confidence in management also plays a role in depressing market valuations.
Declining confidence can trace to poor corporate hygiene, weak investor relations & communications and bad executive behavior. Corporate hygiene is the organizational equivalent of brushing your teeth daily and renewing your driver’s license on time.
Simply put, many investors will not want to own and trust companies that don’t operate responsibly, sensibly and ethically, regardless of market potential. Addressing high visibility problem areas can improve shareholder confidence and hopefully reinflate share prices. For example:
1. Refine your investor communications strategy
> Public companies need to move away from cheerleading to better managing the expectations of a largely retail investor base. This would include sensible and realistic future state messaging, greater disclosures and more senior leadership involvement. Furthermore, many investors have legitimate concerns that need to be addressed. Executive silence – coupled with a decline in equity analyst coverage – can fuel investors’ fears about worst-case scenarios. CEOs and CFOs must be more proactive in getting their message out across all communication channels.
2. File accurate statements on time
> Too many firms file late or with incorrect numbers, resulting in the embarrassing need to restate. There is no excuse for management or your auditors to miss here.
3. Signal confidence through stock purchases
> Announcements of executive purchases and share buybacks can signal to the market that management has confidence in the business and the stock is undervalued.
4. Curb dodgy executive practices
> Exaggerated stock promotion, excessive pay and 'Imperial-like' management behaviours are not confidence-inducing habits. They should be curtailed.
5. Improve governance & reporting
> Better Board governance around risk management, diversity, and disclosure will foster trust and allay concerns, especially with tentative institutional investors.
6. Retool your financing strategy
> For many cannabis companies in today’s equity markets, raising equity capital can be perceived as highly dilutive (i.e. negatively) by investors. Firms might be better off raising debt or using cash flow to fund operations and investment.
It is also possible that the stock market is sending you the right message. A 'growth-at-all-costs' strategy may no longer be the best approach for the business. Realistically, it may be time to refocus your strategy & business model to something more modest.
#funding #capitalmarkets #shareprice #valuation #governance #investorrelations