There’s no doubt that the cannabis industry has expanded by leaps and bounds over the past several years. Though as of late, things have been rocky. However, an executive of a major cannabis company has a great philosophy on how to turn the negative into the positive. Jason Wild, executive chairman of multi-state operator TerrAscend TRSSF, president and CIO of JW Asset Management pointed out that the industry should have been raising equity over the last couple of months though hasn't.
Wild explained at Toby Channabis Twitter Spaces, that some companies were worried about their stock plummeting. Companies should realize that investors are not focused on stock actions, but more on whether the businesses are sustainable, he said.
Wild, a featured speaker at April's Benzinga Cannabis Capital Conference in Miami, believes cannabis companies should be more focused on what their balance sheet will look like and how they’re going to fix it.
“They shouldn't be worried about dilution, they should be worried about whether they're going to be able to sort of stay out of receivership over the next two or three years,” Wild said.
TerrAscend made all the right moves concerning its balance sheet in the second half of the year and structured the business so that “we could be cash flow positive, even if 280E never goes away.” Wild said. To those who are not familiar with 280E, this is one of the most challenging financial issues for most marijuana operators. The 280E is an IRS tax code, which states that "no deduction or credit shall be allowed in running a business that consists of trafficking a controlled substance." This means that until cannabis is removed from a list of controlled substances on the federal level, there will be no tax deductions or credits given to legal cannabis operators.
This financial obstacle is one piece of the puzzle the industry has been and is currently facing, yet Wild remains optimistic. An example he looks back at is the tech bubble and the hottest stock at the time: AOL. Several years later and coming out of the bubble, it was Google GOOGL, a company no one had heard of five years earlier.
“I think that is going to happen here. And, it’s happening now. It’s like we’ve been saying internally – the environment right now is so bad that it’s good.” Wild added that companies that can be sustainable, and have a pathway to sustainable profitability after taxes and interest are going to have many opportunities to increase the size of their business for practically no money.
Benzinga's Cannabis Capital Conference Is Back
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