"ACTIONABLE INVESTMENT INTELLIGENCE"
Today, we will be talking to Michael Harnett, an Entrepreneur and Chief Business Catalyst. Michael is an advocate of the medical cannabis industry, and supports this growing sector by matching great businesses with capital or partnerships. Thanks for joining us today Michael! Everyone is interested in jumping on the cannabis investing bandwagon, the real question is, “Is it too late?”
I would suggest in some instances it is too late, but the good news is that in many other scenarios it is not too late at all. For instance, in Canada, it’s going to be extremely difficult to get a producers/medical supplier license. From what I understand there are thousands of license applicants but literally there have only been 43 licenses issued to date. Therefore, I would say being a producer/medical supplier in Canada is not likely, unless you buy or do a merger with a currently licensed organization. On the other hand, new opportunity will emerge when adult-use if legal across Canada, but for now, you won’t get into the producer side of the industry any time soon in Canada.
With that said, the American market is booming in many states, with California and Colorado being market leaders. Of course, these are a both medical and adult-use legalized state, which provides significantly more opportunity than other states that have only legalized medical use. Where the opportunities are would be with grow operations, dispensaries, oil products extraction processors, edibles and food manufacturing, and any new-to-market cannabis medicinal products that are developed by various industry players. The list goes on with industry complimentary and industry supporting business’ very much like High Canada magazine is supporting the cannabis industry; this just highlights the vast and varied opportunities that still exist with the cannabis marketplace.
Important to point out, many new opportunities will open in Canada for both vertically and horizontally integrated business that will serve a mature market once adult-use is legal in Canada in 2018. For this reason it’s a great time to get into the market now rather than later, even though down the road may also present opportunity. I wouldn’t wait until the market has evolved and become saturated, because you will indeed miss out on possibly one of the best financial opportunities of a life time. ‘Right now’, at this very point and time in history, we are seeing similarities to the dot.com boom. This could be the next big thing in economic history where we see a significant shift in wealth, and the boom is on now, so the time to act is right now!
What do you think potential investors should look out for in this new and thriving market?
Obviously, there are a lot of things investors need to watch out for and be weary of. In the USA for example, the challenge is that federal law indicates any canna-business is illegal. The Feds for the time being are respecting State laws, but Trump and Jeff Sessions continue to make comments that leave investors second guessing, which is also creating market turmoil. Investors need to weigh the risk of whether the Trump Administration is going to prosecute cannabis businesses and shut them down or not. This is a huge risk, but thousands of businesses in the USA have taken that leap of faith, and some are prospering very, very well.
Unfortunately, the Federal US legalization dilemma also leads to the inability for canna-businesses to file business expenses on their Federal Tax returns, because the business is not recognized as a legal business federally, so as a business you lose out on those business expenses and potential tax write-offs. More importantly, this issue leads to legal, but very creative, and sometimes confusing financial reporting. In my experience working in the cannabis sector on the capital funding side of canna-businesses, this unusual and creative accounting is leaving investors concerned about the validity of a company’s financials. And in some instances, although it’s legal accounting practices for this industry, this accounting practice in some situations is unintentionally inflating the value of the business, causing issues when seeking to sell the business or when looking to secure investors, while so many are walking away from these deals. I have many of these viable investment opportunities on my desk that are seeking funding of some form.
Once you are at the stage of assessing a company to invest in, this is where investors need to have a company’s financials audited to verify the company’s value before agreeing to a deal. It’s crucial to point out, these canna-businesses are utilizing legal and ethical accounting practices and are working with the system that is currently in place, but this tends to make investors a bit weary. However, if you just do your due diligence, you can make an educated decision, because some of these businesses are profitable and well established lower risk investments.
Now some of the more obvious things investors might want to watch for are the financials of the business in general, and ensure they are in fact audited by a 3rd party credible source, ensure numbers are accurately reported, and verify with bank records and tax returns. Also, be sure to review year of year growth and profitability. Whether you are investing or loaning funds, you want to know the company has the ability to service any debt, and operate an efficient and profitable canna-business, giving you as an investor peace of mind that you will realize a return on your investment.
Of course, one other area to watch for would be the specific segment of the industry you are getting into. If you open a dispensary and there is a lot of competition close by, this is not a good place for investors to put their money. Look at areas with little to no competition if getting into the producer/dispensary side of the business, or better yet, look at some of the emerging segments of the market, where profits are greater, and there’s less competition. These can be cannabis oils/extraction companies, labs and clinical trials, edibles and beverage markets, and medicinal product manufacturers, as these are the areas of the industry with higher profit margins and lower risk for investors.
How do you think the markets will do in the next year, with the announcement of legalization being slated for July 2018?
I believe the markets will be continue to be very strong and stimulated, thus making Canada a tremendous source to raise capital and create win-win business and funding strategies for my clients and business partners. Canada is the place to leverage your investment dollars with lower risk investments into the cannabis market. For this reason we have developed a very unique, innovative and proprietary go-public business wealth creation strategy that some in the industry say is the best they have ever seen.
It’s important to note, I’m not a market expert or a financial specialist. I base my opinion solely on what I hear and learn in speaking with many industry players in both Canada and the USA, as well as reports and news stories I’ve read, feedback from my team of financial industry experts and underwriters, along with clients that I’m actively working on funding and growth deals for. The bottom line, with adult-use being legalized in Canada in 2018, this makes Canada a great place for investors to invest their funds, and invest into lower risk investments opportunities.
Now the exciting news is that our signature, proprietary investment strategy can produce 200% to 300% returns for early-in or first-in investors. So yes, I believe legalization across Canada will make our country the place to invest, and quite likely make Canada the launching point to European markets, so in my humble opinion, Canada is the premier location in the Western world to invest in the cannabis market.
How would you compare the Canadian cannabis investment opportunities vs. the States?
I have touched on this a bit throughout this article, but to clarify, I think the Canadian market is the more stable market to invest in. The medical Canadian cannabis industry is far more regulated, has fewer players at the producer/medical supplier level, and is a more mature and evolved market, thus making it far more viable and offering a more stable business model in general. And the biggest factor is that the Canadian market doesn’t have the uncertainly Federally that the US market currently has, a critical concern to consider.
These are the important factors I considered, and are the key reasons why I believe the Canadian Cannabis market can offer a better and lower risk option than American investment opportunities can, at least for the time being. Although, it’s extremely important to note, the US market is so much bigger, and can ultimately provide much greater returns on investment for investors. Yes, there is that element of risk in US that you don’t have in Canada because of the Federal vs. State laws, however, if are ok with some risk, the US market provides massive opportunity that Canada will never, due to population along, and so I would never tell anybody to stay away from the investment opportunities in the US, I would simply say to perform your due diligence and this process can help significantly mitigate your risk.
One final thought, I am personally working with entities and companies on both sides of the border, and are working in investment deals in both Canada and the US, so there is potential in both markets just be diligent so you can make educated decisions that lower or minimize your risk.
Contact: Michael W. Harnett at905 359 8109 or email@example.com www.michaelwharnett.com
Is it too late to get into the Green Rush?