Public market volatility is off the charts and many investors are seeking liquidity. It is the job of private markets investment managers to keep cool heads in the face of uncertainty, analyze situations objectively and make decisions that are in the best interests of their clients over the long-term.
Private cannabis companies who have raised capital recently and have cash on their balance sheets should be in good position to weather the storm. On the other hand, private cannabis companies who are in the process of fundraising or had plans to do so in 2020 will likely struggle to raise capital. Some of these companies will run out of cash and become distressed, making them acquisition targets for their competition or for opportunistic investors (further enabling investors to drive exceptional terms). Investment managers urge cannabis executives to prepare for a rocky couple quarters by identifying what costs are non-essential to their core business and can be pushed down the road until visibility is clearer.
As investors face uncertainty associated with the spread of COVID-19, they are less likely to invest in early stage cannabis companies. "We believe investment managers with dry powder will ultimately benefit from such an environment since capital dedicated to cannabis investments will become more scarce. This will enable investors with dedicated pools of cannabis capital to drive more favorable terms and valuations since their capital is in higher demand."
Read more at newcannabisventures.com
