MJBizCon2021 was as explosive as the cannabis industry itself. The range of programs, volume of exhibits and sheer number of attendees, despite the continuing impact of the pandemic, reflected the vibrant and fast-growing cannabis space itself.
Cannabis valuation continues to take center stage in any discussion about the operational, financial or regulatory aspects of the industry.
Among the several take-aways from this conference, the prospect of federal legalization is not necessarily accretive for all cannabis valuations; it’s not as simple as concluding that national legalization is good for the space in an absolute sense, or that the status quo is bad for cannabis values. Indeed, national legalization is not a binary equation that translates to unqualified benefit for the industry, as the analysis is multifactorial and far more nuanced. A fully vertically-integrated MSO in Maine, for instance, will likely face exponentially higher transportation and cultivation costs if its growing operations were relocated to a more hospitable, year-round fertile climate such as California or New Mexico, and yet federal legalization may well compel that operator to so move its flower to the US Southwest to remain competitive. In addition, even highly scaled, successful MSOs currently operating in more than one state or region may face stiffer competition and existential threats from the legacy tobacco oligarchs if national legalization were to allow those bystanders, currently sidelined, to enter – and threaten to take over outright – the cannabis market. These considerations are just some of the factors underscoring the vagaries of any highly regulated industry, where growth prospects and assumptions about future value must reasonably capture the anticipated trends in business as well as the political arena.
Whether a dispute arises over the valuation of an entire MSO, one of its acquisition targets, its retail dispensaries or any other key assets, an operator needs to be well armed with every valuation tool and weapon available. MJBizCon helped demonstrate, once again, that such a valuation exercise demands a seasoned blend of art as much as science, and that the unique facts and circumstances of any asset or enterprise must be fully taken into account before applying the relevant valuation metrics.