What To Do With Capital By The End of The Year
Goldstalk surveys its most active cannabis co-investors and founders on key cannabis end of year considerations. Our group is evenly divided between cautious dehortations to investing further in the last 45 days of 2020 to a careful yet systematic approach to picking up great clients needing more capital to close out the New Year. What both groups agree to is that despite the terrible, terrible Covid 19 Pandemic, 2020 was markedly better than 2019 in all respects (with many improvements still pending) and that 2021 will likely be better than 2020.
Here are each camp’s positions on 5 key questions:
What is left to do in 2020?
Founders:
Compliance is surprisingly a priority for licensed operators in California and Nevada. Finishing and revising SOP’s, completing and amending employee handbooks and final year end “mock” facility inspections seem to be on many agendas. Many founders are now acting on recommendations provided by third party consultants made earlier in 2020.
Investors:
Closing investment positions in the active pipeline are definitely the NUMBER ONE end-of-year priority. Many cannabis investments beginning in Q3 are still being reviewed and underwritten.
How will 2021 be different or look the same as 2020?
Founders:
Many Grow Operations are focused on higher energy efficiencies through 2021 and plan on working to reduce energy costs and improving their bottom lines. Our dispensary owners are predominantly consumed with the buyer’s experience and to raise ticket amounts for higher top line revenue. In all cases, cannabis founders are optimistic about how their businesses will fare in these difficult and challenging times and believe their net profits year over year will improve.
Investors:
Marijuana investors are particularly sanguine about the unfolding events in 2021 and extremely interested in the political landscape and the upcoming legislative changes that are likely to benefit the cannabis industry. Goldstalk and its investors are paying attention to more activity by Multi-State-Operators (MSO’s) that will likely need capital for expansion, mergers and acquisitions.
Where would year-end capital best be deployed?
Founders:
Most founders we surveyed stated that any capital sourced prior to the end of the year would be used for inventory and increased capacity. Certainly, demand is strong and has created pricing spikes due to uneven availability and distribution of certain strains, etc. Most business owners remain in growth mode.
Investors:
There is a year-end flight to quality. Most investors are sidelined and looking for low leverage end of the year “sales” that include all real estate backed investments, business loans that provide opportunities for equity and seller carry back acquisitions. Most MJ investors are satisfied with lower yields and better cannabis operators.
Were 2020 goals and targets achieved?
Founders:
A majority of canna-business owners met or exceeded revenue projections for the year and are hopeful to improve further based on the upcoming holidays. Operators anticipate a very strong holiday season and are “Ramping up” with staffing, inventory, and production.
Investors:
Results for investors were mixed, in that targets for yields were in the 30% range with actual ROI’s coming in at less than half that. For most investors, Goldstalk included, the main objective of not losing money was and remains the primary goal. Many marijuana investors believe that the changing investing landscape will not deliver the high and mighty yields previously attained in 2016 - 2019.
What's next?
Goldstalk continues to underwrite all capital requests with a mind's eye to serving the needs of these last minute capital requests. Please contact us to get started with your capital request or investment placement.