Accessing the capital necessary to grow your business is one of the most difficult issues operators must overcome.
Accessing the capital necessary to grow your business is one of the most difficult issues operators must overcome. For multi-state operators, private equity and venture capital deals often cost you a large piece of your business. And if you want to go public the only path is through Canada, which is additionally complex and risky. Local and mid-size cannabis operators are denied all but the most basic banking relationships, making simple business loans nearly unattainable. And it goes without saying, you can forget about getting access to Federal SBA loans or help from COVID-19 relief programs.
Check out our guidance below for best practices on preparing for a capital raise, where and how to raise capital, the latest on SPACs, and much more.
As you grow and expand your cannabis company, you may need to take on debt or give equity for raising capital. We can help your team with technical memos and make the necessary journal entries. Further, we can help you evaluate the impact on your business of regular and convertible debt as well as bridge loans.
We also advise businesses on how to distribute convertible and redeemable preferred stock and understand the impact of warrants, call, and put options and other complex instruments. There are a couple of different ways to go about valuing a company or group of assets. Three main ones you see are the discounted cash flow method or DCF, guideline, and public company method, properly known as GPC.
The last one is a guideline transaction method, which is really based on mergers and acquisitions, as far as the guideline public company method goes. A good way to kind of think about it is that it’s very similar to comparable sales in real estate, right? Let’s say you’re looking to sell a property. You can see what the offering prices are in your neighborhood. If a house on the market that’s very similar to yours is being offered at a bottom million, then you can use that as an indication of a value for your house.
The guideline transaction method is very similar to this method. In a sense. The only difference is that you’re actually looking at sales that have occurred. You will look at houses in your market that sold, and so let’s say that house sold for 2 million. You use that as an indication of value. A similar thing happens with any industry including the cannabis industry. Cannabis businesses are bought and sold every day, and then you really kind of use the values that those businesses are being bought and sold for is an indication of the value of the company you are looking to invest in.