“Initially, we weren't valuing companies at all. It was based on market potential,” said Aaron Gray of Alliance Global Partners at Benzinga in Hollywood, Florida. highlighted in an in-depth session on the evolution of cannabis company valuations at the Cannabis Capital Conference.
The panel discussion featured industry experts such as Tahira Rehmatulah of Highlands Venture Partners who shared insights on how the focus has shifted from growth at all costs to operational efficiency and profitability.
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“What we are seeing now is a shift towards metrics that emphasize the longevity of companies,” she explained, noting that the industry is moving towards more financially sustainable practices.
Mr Gray added: “Back in 2019, there were a lot of RTOs happening and it was all about which states were exposed to adult use and could be converted. Now we are starting with investors and looking at balance sheets and cash flows. We're talking about it.
Meanwhile, Sander Zagzebski, Co-Chair of Clark Hill's Cannabis Industry Practice Group, discussed the legal and regulatory challenges impacting the assessment.
“Any lawyer who advises you on financial metrics is probably talking to the wrong lawyer,” he said, before starting to seriously talk about how legal uncertainty affects financial valuations. he joked. “Valuation has moved from a concept based on wishful thinking to one that is more mathematical and balance sheet-based than ever before.”
Equity analyst Pablo Zuanik also expressed his opinion on the need for industry-specific metrics. “Cannabis is not yet at the point where it’s valued like a normal industry. We still use metrics like EBITDA, but it’s not ideal given the regulatory complexity,” he said. said.
The impact of technology on cannabis valuation
Moderator Tim Seymour of Seymour Asset Management began another interesting discussion by highlighting the dynamic changes in cannabis technology. “The cannabis sector is increasingly influenced by technology, and traditional boundaries within the industry are beginning to blur.”
Mr. Rehmatula elaborated on this point and provided concrete examples of how technology integration is playing a transformative role.
“Companies are leveraging technology to enhance their operational capabilities,” she said. “For example, data analytics and AI are being extended not only to internal processes but also to customer-facing applications to improve market reach and customer service.”
She also discussed the potential for cannabis technology to crossover into other sectors. “There are also cannabis technology companies that are not limited to this industry; they are expanding and applying their technology to other markets where data and operational efficiency play a key role,” Rehmatullah said. Ta.
Additionally, she emphasized how important these technological advances are to the industry's growth and are becoming increasingly central to valuation discussions.
“The use of technology to optimize supply chains and improve compliance protocols is also becoming an important factor in valuing cannabis companies,” Seymour added, noting that the growing importance of technology in business strategy He emphasized that there is.
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