September 12, 2019
HFM Global published an article by Assurance Partner Marni Pankin, analyzing the risks and other considerations of launching and investing in cannabis funds.
HFM Global
Excerpt:
While multiple valuation approaches should be considered, some methods may not be appropriate due to limited industry benchmarking data, small company capitalisations, and lack of financial reporting and reliable financial projections. For instance, using a market approach has limitations, as guideline public companies may not be comparable businesses, exponential growth and speculation have skewed valuations, and public transaction data is limited. New cannabis companies typically have negative EBITDA, so enterprise values need to be computed using revenue multiples, which are less comparable.
