EXCLUSIVE: Surviving The Storm Or Strategies For Cannabis Companies Amidst Capital Constraints

The cannabis industry has had its fair share of trials and tribulations over the past few years. Following the recent the Department of Health and Human Services's (HHS) recommendation regarding marijauna rescheduling and legislative develipment related to SAFER Banking Act, one cannot help but wonder, what's next for the businesses in the space?

"I think all of us as practitioners or participants in this industry have to stop mystifying, you know, creating this mystery about cannabis because it's a true business." That's according to Scott Moskol, partner and co-chair of Burns & Levinson's Financial Restructuring & Distressed Transactions and Cannabis Business & Law Advisory practices, who joined the Benzinga Cannabis Capital Conference last month in Chicago to talk about the current capital markets, how investors and companies stand today and whether there is a light at the end of the tunnel.

Everything from drooping wholesale prices to employment in the industry and investment that follows suit to public MSOs consolidating their shares just to stay listed because their prices have gotten so low, Moskol sees it all "as a natural business cycle."

Three other experts who joined a panel moderated by Larry Conrath, senior vice president at Hub International agreed.

Michael Hogan, a partner at Armanino LLP and head of the firm's corporate finance and restructuring practices, said that even though factors putting pressure on the marketplace are numerous, businesses with true value can find investment. Focusing on fundamentals results in more transactions, even in times of distress, he said.

"One of the things that we talk about with clients is positioning yourself now for that long haul or having done that before, as opposed to thinking that suddenly something's going to happen or change in the near term," Hogan continued.

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A Way Out?

David Traylor, a senior managing director at Golden Eagle Partners sees diversification as a way out of the current capital constraints.

"We have a client that's hemp-based cannabinoid client that's killing it because they're diversified across molecules," Traylor said.

He advises businesses in the space to refrain from selling their companies and find a way to navigate these challenges successfully.

"Don't sell now, make it through this because if you make it through this, everybody else goes out of business and your value that much higher, you have more market share," Traylor added.

Janet Jackim, partner at Zuber Lawler, said that one of the things cannabis businesses could opt for to stay afloat is to renegotiate a deal.

"if you're a company and you have a lease and you have a mortgage and you have the equipment, leases and other contracts, supply contracts, then make a list of your top, say, ten contracts and one by one start renegotiating," Jackim said.

She added that honesty and transparency are of utmost importance.

"Be honest, transparent, share your financials and basically say, I need help," said Jackim who is a cannabis business lawyer with ten years of experience in cannabis and 45 years of practicing law. "How are you going to help me?" 

Golden Eagle's Traylor agreed, adding that surprises are always bad when doing business.

Photo: Courtesy of Benzinga