Photo of Scott Sachs, Regional Managing Partner of CohnReznick, introducing Cheryl Shuman
Photos and Story by Mike Pensive
The CohnReznick Cannabis Conference at the Omni Hotel in downtown Los Angeles was filled with both substance, heart and style. As the first cannabis conference of 2019 (in Los Angeles, at least), the ballroom was packed with several hundred investors and cannabis business professionals, all eager to hear about how the pieces of the California cannabis industry puzzle were coming together. Particular topics of interest were how to solve the banking problem, which sectors, states and countries were poised to expand in 2019, and what the permanent cannabis business regulations in California were shaping up to look like.
Kicking off with a crackling fireside chat with former California State Treasurer, John Chiang, we learned that in 2018 California collected much less tax revenue than was anticipated. Apparently, there is still a great deal of illegal cannabis business occurring in California, which has considerably reduced the amount of taxes available for collection by the state. In addition, this illegal activity is hurting profits from licensed dispensary owners as a chunk (a precisely calculated amount) of their business is being siphoned off by the illicit market.
Photo of former California State Treasurer, John Chiang
Chiang mentioned that there is a working group which is brainstorming potential solutions to the banking issue (for example, suitcases and boxes filled with cash being dropped off at the state tax office), but at the moment, if a bank were to accept cannabis deposits, the FDIC would not insure that and may not insure any of their deposits, which is too much for any bank to risk. Chiang encouraged cannabis business leaders to lobby and use their relationships with people who are close to members of Congress in order to resolve the banking issue. At this time, we are still a year or more away from having all banks being able to accept deposits from cannabis businesses.
Chiang briefly discussed diversity and inclusion in the California cannabis industry and said that this year $10 million has been earmarked for grants and research to help increase the number of minority owned cannabis businesses and that in 2020 that amount will double to $20 million. Adhering to local and state government regulations and whatever parameters are set forth to qualify for grant money is the best way to increase your chances of getting some of it.
The Investment panel was both informative and entertaining as Nic Easley, CEO of Multiverse Capital and 3C Consulting got into somewhat of a heated debate (ok, it was lukewarm but you could tell that “it was on”) with Vivien Azer, Managing Director of Beverages, Tobacco & Cannabis Equity Research for Cowen and Company, over Canadian stocks and various other cannabis investment strategies for 2019. It was kind of like watching a lion chasing a wounded gazelle but then stopping just short of eating her for lunch. Fun stuff.
Photo of Nic Easley, CEO of Multiverse Capital
Left to right: Nic Easley, Scott Greiper, Peter Rosenberg
Scott Greiper, President of Viridian Capital Advisors, stated that while it may seem as though investing in Canadian cannabis companies is less risky than investing in US cannabis companies due to the fact that cannabis is federally legal in Canada, but that valuations are too high (no pun intended). Greiper went on to predict that in 2019 more money will be continue to be invested into US cannabis deals as exits are becoming more clear. To set expectations, often cannabis investments (which have been properly vetted and have a solid management team) will likely take at least 12-18 months to generate returns for investors. That being said, Viridian only invests in approximately 1% of the cannabis companies which they consider.
Having a solid management team made up of people who have been successful in other highly regulated industries is one thing he and his diligence team looks for prior to making an investment into a cannabis company. In addition to that, checking to see that a cannabis company has an independent and professional Board of Directors is important when considering investing in any cannabis company. Often cannabis companies are founded by people with no business experience and put a friend and/or an early investor on their board which is not the best practice. Greiper also mentioned that there are opportunities for investing in research and testing in Israel, the world leader in those areas. There is a pretty high (power of suggestion getting to you yet?) likelihood that pharmaceutical companies will be looking for opportunities and partnerships with companies in Israel to create new cannabis based drugs. Israel will begin allowing cannabis exports in mid 2019.
Peter Rosenberg, Partner of Merida Capital Partners, stated that there is more and more competition for investing in the same early stage cannabis companies. This makes it a bit harder than it used to be to find a deal, do your due diligence and take an equity position, pre IPO.
Nic Easley had some very insightful comments about the pitfalls of investing in international cannabis companies, including double checking to be certain that the country isn’t violating international law (not a lawyer, but it seems like good advice). Finally, Easley mentioned that individual investors into a single cannabis company don’t have that good of a shot at generating a positive return. Instead, it might increase one’s chances of success to invest in a cannabis fund which is being managed by experienced professionals who have carefully studied and helped shape the legal cannabis industry, and who are paying close attention to what the companies they have invested in are doing on a regular basis.
Next there was an interesting panel about banking and trying to solve the banking issue. The upshot? It’s still not solved and likely won’t be until after the 2020 elections, hopefully. Following that, there was a panel about risk management and insurance. When I woke up from my nap, I realized that I had drooled all over my Valentino suit. Luckily I slept through that insurance panel because it would have been far too painful to sit through it awake. The takeaway? Buy insurance and then buy more insurance to insure your original insurance policy or something to that effect. That’s pretty much what I recall, or perhaps I’m making it up. Maybe they were saying that cannabis business owners need to drink Ensure? I’m not sure. Anyway, if any of you reading this article (thanks for hanging in there until the end) are really interested in insurance, I honestly feel sorry for you because insurance is, yawn, so boring. Still, you need to have it.
Finally, the moment we were all waiting for, was the keynote presentation by Cheryl Shuman, the “Queen of Cannabis” and CEO of Beverly Hills Cannabis Club. Shuman shared her story and there wasn’t a dry eye in the house (though my eyes and a few of my colleagues’ eyes were a bit red for some reason). In a nutshell, which is a strange place to keep a story,
Photo of Cheryl Shuman, “The Queen of Cannabis” and CEO of Beverly Hills Cannabis Club
Photo of Cheryl Shuman, “Queen of Cannabis” and CEO of Beverly Hills Cannabis Club
Shuman’s story is a rags to riches story combined with a near death comeback to being vibrant, incredibly successful, and passionate about ensuring that everyone in the world has access to medicinal cannabis and is educated about its value in healing cancer, which it did for Cheryl Shuman. Shuman is a master storyteller and she brought along a Powerpoint to connect the audience with her story, her family and her triumphant return from the brink of death, thanks to cannabis and some wonderful people.
Mike Pensive is a freelance photojournalist who has written for Cannabis Now, LA Cannabis News, Terpenes & Testing and Get High. His photographs have also appeared in Forbes.com and mg retailer (and all over social media, both credited and not). In his spare time, Mike enjoys shaking his booty at and getting freshly baked at Phish concerts (arguably the best band ever).
Published: January 19, 2019