The COVID-19 virus has affected Australian cannabis investment, but one corporate finance expert said there’s been an influx of money lately.
On Monday (June 22), during the first day of this year’s Prohibition Partners Live event, a panel of expert commentators discussed the adoption of cannabis stocks among investors and the larger marijuana business from an Australian perspective.
The panel consisted of Sean Kennedy, corporate finance director with PAC Partners, and Peter Crock, CEO of Cann Group (ASX:CAN,OTC Pink:CNGGF).
When asked about capital challenges caused by the effects of the novel coronavirus pandemic, Kennedy said companies on his radar saw extreme lows in March, but since then there’s been cash coming in from specific types of investors in Australia.
“There’s a lot of money in our pension market looking for alpha, looking for investment return,” Kennedy told listeners at the online event.
According to the investment executive, following the global lows at the end of March he noticed a sense of “desperation rising” as companies attempted to run solvent. Later on, this transformed into opportunistic deals in which pieces of companies became available at what Kennedy referred to as reasonable discounts.
“A lot of money has been raised in the Australian markets in the past two months,” he continued. “Investment bankers are very busy.”
Kennedy said currently Australian cannabis companies have options available when it comes to capital raises, but there are conditions attached. He explained that if an asset is struggling, there will be a steep discount attached to the raise, while if the deal is designed to take advantage of the difficult global landscape then a more humble discount will be in place.
PAC Partners is a Melbourne-based investment services firm and has participated in deal-launching movements for various Australian cannabis firms, including Cann Group.
Cann Group is a medical cannabis firm working to expand the access of medical patients in Australia. The firm has a cultivation license from the Australian government.
Given the construction of the Australian Securities Exchange (ASX) and its predominantly venture-size offerings, Australian investors are the perfect target for cannabis investments given their higher risk tolerance, according to Kennedy.
The investment executive went on to say there’s been a progression in the evaluation of cannabis names for Australian investors. At the beginning, the industry was closely watched for hype and tended to live on excitement rather than fundamentals.
The investment expert said these days investors are asking to see positive earnings before interest, taxes, depreciation and amortization (EBITDA), a staple metric for the industry.
According to Kennedy, investors are also looking for support for the cash flow plans attached to companies’ business models and opportunities.
For his part, Crock told the audience he has noticed an increase in debt investment from banks in particular for cannabis companies. This observation was supported by Kennedy.
When asked about the right timing for an Australian firm to go public on the ASX, Kennedy explained that at the launch of the marijuana market in Australia it was crucial for companies to have support from a Canadian cannabis counterpart as it showed tremendous validation for the Australian operation.
However, that is no longer the case — Kennedy explained that Canadians have become much more inverted when it comes to international exploration.
In fact, several Canadian names pulled back on international ventures and partnerships once it became apparent that their cash flow would not be able to meet the demands of an expansive international business, especially as losses for Canadian cannabis corporations continued to expand in the summer of 2019 leading into 2020.
“We probably don’t need them as much in Australia now as a validator to a quality company,” Kennedy told the audience at the event.
Don’t forget to follow us @INN_Australia for real-time news updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Some pretty important news out of health and wellness; beverage and natural products company BevCanna Enterprises Inc. (CSE:BEV, Q:BVNNF, FSE:7BC) this week. For those of you following the Company with us, stay tuned.
As investors continue to prioritize cannabis opportunities in the US, market watchers expect mergers and acquisitions (M&A) to play a role in the future for Canadian companies.
A consolidation trend has been expected in the Canadian cannabis space for some time now based on the size of the market compared to the number of operations in the country.
BioHarvest Sciences Inc. Unveils the Unique Polyphenolic Content of Its Upcoming Olive-Based Nutraceutical
The product will include polyphenols known to have significant health benefits.
BioHarvest Sciences Inc. (CSE: BHSC) (“BioHarvest” or the “Company”) has reached an important milestone in its development program of additional Nutraceuticals. The olive-based Nutraceutical product scheduled for market availability in the second half of 2022 will contain the following unique matrix of polyphenols: hydroxytyrosol, trosol, and verbascoside. These compounds are the major polyphenols in naturally grown olives and are responsible for the high antioxidant activity of olives and olive oil. Importantly, the BioHarvest olive-based Nutraceutical product will provide all the benefits of olives and olive oil with a low calorie count per serving.
Cresco Labs (CSE:CL) (OTCQX:CRLBF) (“Cresco” or the “Company”), one of the largest vertically integrated multistate cannabis operators in the United States, announced today that it will report financial results for the fourth quarter and full year ended December 31 st , 2020 on Thursday March 25 th , 2021 before the market opens.
The Company will host a conference call and webcast to discuss its financial results and provide investors with key business highlights on Thursday March 25 th , 2021 at 8:30am Eastern Time (7:30am Central Time).
Canopy Growth to Participate in BofA Securities Virtual Consumer & Retail Technology Conference on March 11, 2021
Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) (“Canopy Growth” or “the Corporation”) announced today that EVP & CFO Mike Lee will be participating in a fireside chat at the BofA Securities Virtual Consumer & Retail Technology Conference on Thursday, March 11, 2021 at 9:30am ET .