The State of Cannabis Capital Markets and M&A

All right, welcome everybody. We're going to let the attendees sort of file in here. Give it a minute or two and then we'll start the webinar.

Good morning, Jim. So this will be real time, Jason, right? These chats will just scroll up.

That's right. Yeah. And the chats and the Q&A too.

Good stuff.

Thank you. All right. Looks like we've got Pretty good showing here in the attendee room. So let's just jump into it, maximize our time. My name is Jason Klein. I'm your host with the Cannabis News Key. I'm a partner at Ramon Law in the cannabis business group. For those of you who are new here, we've been doing this webinar series, thought leader speaker series on cannabis business issues, cannabis business Business Topics for going on 6 years now. We're going to have our anniversary this fall for 6 years. Very, very excited today to host this conversation with Peter Rosenberg and Trip Kuever. We're going to be talking about all things business, financial, you know, macro cannabis industry, public-private markets. We're going to be talking about all the things affecting your pocketbook as a cannabis business owner and advisor with two of the most experienced C-suite investment banking cannabis folks out there. So we're going to jump into that in just a moment. And before we do, as usual, I want to just give you a little navigation around the Zoom screen in case you aren't familiar with it. There's a chat feature, there's also a Q&A feature. Okay, so the format of this conversation is, is really is a, you know, sort of like a fireside chat, right? So we want you to have the opportunity to ask your questions to Peter and Tripp and for them to be able to respond directly to those, those questions that you've got on your mind. So the best way to do that would be to type those questions in the Q&A. Box there. I'll be monitoring those questions. We'll be seeing them as they come through, and then I'll sort of volley them over to, to Tripp or Peter as, as the conversation proceeds. So get them in now, get them in, you know, as they come up throughout the next hour, and we'll do our very, very best to try to address those directly live here with you today. This conversation is being recorded, all right? So the link is going to go out to everybody, the recording is going to go out to everybody afterwards. And, you know, if you've got a question you think a friend might be interested in, go ahead and ask the question, and then we'll make sure they get the link later on so they can watch it on their own time at their own convenience. And you can use the chat feature as well if you have specific questions. If there are things that, you know, are specific to your business that may be personal, you don't wanna share with the group, of course, I'm always available. You can reach out to me, email's usually the best, jason.klein@ramonlaw.com. And we're gonna share Peter and Tripp's email contact information with you as well so that you can reach out to them afterwards if you have specific and private questions for them. Okay, uh, one more, uh, item. Uh, we're going to be, uh, coming back in July, the last Wednesday in July, which is our current schedule, same time, noon Eastern time. It's going to be July 27th. We're going to be skipping August, okay, as usually we sort of take a, take a summer break, and then we'll be back in September. So keep an eye out for the July guest announcement should be coming out in the next week or so, and save that time in your calendar for July 27th at noon Eastern time. I think that's it for our housekeeping, and so let's jump into some introductions. As I mentioned, we've got Trip Kieber and Peter Rosenberg. Trip, you know, for anybody who's familiar with the cannabis industry, Trip needs no introduction at all. One of the foremost C-suite, you know, trailblazers in cannabis for years now. He was previously with organization— well, with Dixie Brands, of course, for many years, starting and really establishing that brand as a foremost brand in the cannabis industry. He's been on boards with the National Cannabis Industry Association, with the Marijuana Policy Project, with the National Association of Cannabis Businesses. Tripp is a well-known figure, you know, for anybody who's been around cannabis, even tangentially. I'm sure you've seen or heard Tripp speak, seen his work through the years. So he's currently with Right Side Advisory, as managing director. And we're going to talk a little bit more about what Right Side does and what Trip is currently up to these days. So welcome, Trip.

Thank you very much, Jason. Appreciate the introduction. It's neat to be back.

Nice to have you back. Peter Rosenberg has a long history in investment banking, financial services, both mainstream, you know, non-cannabis, as well as 6 years experience in cannabis. Now most recently with Viridian Capital Advisors, head of M&A there, also with Merida Capital Partners, senior partner. He's currently also with Grow Generation. He's got, as I said, several decades of experience prior to cannabis on Wall Street and investment banking capital raising transactions, development with names like Duff Phelps and Wells Fargo, Barrington Associates, Solomon Brothers. The list goes on and on. So Peter, welcome.

Thanks, Jason. Pleasure to be here this morning. Thanks for having me.

I couldn't think of two guys who are better to talk to about current capital markets private and public affecting cannabis industry than the two of you. It's such a dynamic time in the global economy. You know, cannabis obviously is hardly immune from the macro, you know, what's going on in the macro markets. So what I'm thinking is that we start this conversation maybe, you know, real big picture and then zoom on down to cannabis. So Peter, maybe we could start with you and where we are today as far as just generally what's going on in the markets generally and how the, you know, how the effects come downstream into cannabis.

Sure. Yeah, we are in very, very challenging times. The cannabis industry has just been confronted with a number of variables that are coming together in a perfect storm against a very difficult macroeconomic backdrop that is seeing inflation and recession and rising energy costs and other input expenses. Highly restrictive capital markets right now. Cannabis has always been challenged to attract capital, but with these forces in place, the capital markets are down over 75% of where they were last year, and particularly in the retail and cultivation sectors, which are even more precipitous declines. And you have an oversupply of inventory that needs to be absorbed in the market. And that's going to take a number of years. There's still a lot of uncertainty regarding legalization as well as banking legislative reforms. And you just have a lot of companies that are struggling because they can't raise the capital to sustain themselves, which is giving rise to increased M&A activity, but the buyers themselves are having trouble because historically they would not only use a portion of the purchase price consideration as cash, but they would use their stock as currency. Stocks are way down in cannabis, again, following the overall market, but even more significantly because of the volatility of cannabis. But with cash, being scarce and the stock currency values being depressed, you're seeing some real, I guess, slowdown to the M&A activity.

Yeah, absolutely. And this is not unique to cannabis, obviously. Issues like inflation and supply chains are across the market. So I saw a statistic recently that they that generally 2021 compared to 2022 market transaction activity in SPACs in particular, which was a very popular vehicle. I think 2021 for Q1 2021, there were something like 800 SPACs going public, de-SPACing, going public. Sort of very popular vehicle comprised of something like $80 billion worth of value there. Meanwhile, in 2022, sort of year over year to Q1 2022, that's down over 80%. That's just not just cannabis alone, but SPACs were a popular vehicle in cannabis as well. And you're just not seeing that kind of activity any longer. So is there some— is this a temporary slowdown? Is this something that we're just going to experience for a quarter or two in your estimation, Peter? Or is this going to be something that's going to sort of continue and linger for longer?

Yeah, I don't think it is temporary. I mean, SPACs were a convenient vehicle because it was so hard to raise capital in traditional forms. And structures. And SPACs gave investors flexibility as well as a current return and the optionality of getting the warrant positions associated with their investment. But what you found was that a lot of these SPACs, either one, they raised the initial private money and/or money enabling for them to proceed with the SPAC, but they had a lot of redemptions too. A lot of the investors that put money into the SPACs, didn't like the targets that the SPACs were identifying, or there was a limited life, as people know about SPACs, and that those terms ran out and the money had to be disgorged. So I think that that's a problem. And very few of these SPACs have actually worked out. Those that have been able to de-SPAC, they became public companies as a result of those transactions. But with the public markets performing the way they have and The companies that those SPACs completed their de-SPACing or merger process with, those have been showing, generally speaking, very poor results. And so that has really been a deterrent to attracting SPAC money. What you find usually is that SPACs become very popular and in vogue when other capital markets or forms of capital are really challenged to be able to raise and attract capital.

Right. But Trip, you've been in that position, the sort of C-suite chair needing to raise and attract capital yourself in probably many instances. What is that? Can you just tell me a little bit about your experience raising money for a company like Dixie and for some of the other companies that you've been through this process, this lifecycle with, and what do you notice now about the current environment that may have changed how founders or operators who are looking to raise money today may better navigate the current circumstances?

It's interesting, Jason. Again, thank you so much for having Peter and I on. Great love and admiration for Peter as my partner. Sometimes we take contrarian views and when Peter and I are in a meeting face-to-face, they generally refer to him as the adult in the room. And I might be accused of being sort of the foolish optimist. I don't disagree with any of the things that Peter said, it's hitting us square in the face and the headwinds related to the cannabis industry are real. But I also believe fundamentally, Jason, Peter certainly said this before, that first and foremost, cannabis entrepreneurs are incredibly resilient. By definition, we're serial entrepreneurs. I've been in the space for now almost 12 years, and we've seen a few of these valleys, if you will. Traditionally, all of us as a collective industry have found a way in which to claw ourselves up to the top. I mean, the cannabis highway is littered with roadkill. We certainly see that unfortunately far too often, And Peter and I fundamentally understand that failures in any sector of the industry are generally not good because it's not necessarily lifting the tide. But I do fundamentally believe that whether you respect this administration or not, that there's probably material activity. Forget about the ending of federal prohibition, that's certainly gonna be important and will be a historical moment. But real progress specific to the Safe Banking Act, I believe that the administration has to do something in the next, in the second half of this 4 years to bring some material change to the industry. They made some fairly strong commitments and, you know, I wouldn't necessarily equate myself to being, you know, tied in with the administration or, you know, the political set, but we are seeing a tremendous amount of activity and specifically money's, being funneled into family offices, into private equity firms, and seemingly have expressed a strong interest through the activity that Peter and I hear about each and every day, or are directly involved with that, you know, they're at certainly near or bottom pricing. And so they believe that eventually those serial entrepreneurs, that resilient group of people are gonna claw their way back. And so best now to get in because I think the fundamental belief is that potentially good times could be coming for the industry, whether it again be a fundamental change to the aspect of federal prohibition, or as I alluded to, safe banking. So I still have a very, very bullish attitude on the industry. Clearly cannabis fatigue is real. Anybody who's been in it like myself for 12+ years, although I took a couple of years off, but I'm back into it, That's a long, tough slog. And so, you know, people are exiting the industry either by choice or by what their business dictates. But I do see greener pastures ahead.

That's great. I, you know, I love to hear the optimism. I think we all could use a dose of that. I don't want to be all doom and gloom. And it does sound like you've got some real optimism about the potential for federal, you know, change on the federal level to sort of be that kick in the butt that hoists the industry out of a bit of a valley here.

I mean, Peter and I have the privilege really to work with some of the largest operators in the country And although we may not be sitting in those offices that are taking place up on Capitol Hill in Washington, D.C., or in Denver, Colorado, but we do have access to those individuals that are conducting and hosting those discussions. And what we are hearing or being given the impression is that changes are coming. And if and when safe banking hits, And I will acknowledge that we've been waiting for this for many, many years, that there are literally billions and billions and billions of dollars sitting on the sideline that have not been able to jump in. And that will be transformational, transformative, certainly for the industry, but certainly probably give a big swift kick in the economy's rear end, which cannabis certainly has been strong indicator, even in good times and bad, that people have a strong and close affiliation with this powerful plant. And so I think we could potentially be a catalyst, you know, relatively small one, but we could be a catalyst for the, you know, for the economy as well, certainly in markets where you have adult use access to the plant.

That's great, it's great to hear. I like that optimism. I think it's probably a very well-founded trip. You've been lobbying many times, you've sat in many legislators' offices, you speak directly to them and you understand their language. So coming from somebody with that experience, it's great to hear that sort of optimism. And quite frankly, given where we've been, you know, I know 4, 5, 6, 7 years ago, a lot of people would have predicted more change on the federal level by now than what we've seen, or at least maybe the optimists would have. I certainly was in that group where I thought that we'd have— we'd be a little bit further along on the federal level. And let's come back to that issue. I want to just sort of toss back out here for the attendees to sort of jot in your questions. On the Q&A feature there so we can make sure to get to all of them. But Peter, I want to come back over to you for a moment and just talk about large companies, whether it be MSOs or private family offices or whatever it may be that are relying on debt, have built a business model that relies on sort of continuing to roll over. Some debt to expand. We all know and have seen these businesses develop and some enjoy some great success over the years. Do you think that's really a viable business model moving forward? Are we gonna see a fundamental change in how these operators specifically build a growth strategy?

Yeah. Well, there is a cap or a limitation on the amount of leverage you can put on a business. And many of these companies also are asset light and what seems to be the typical debt structure is a secured loan. So there has to be some underlying assets to provide as collateral, but it sort of underscores what Trip's point is in terms of optimism. What's changed is that these companies now have to show some real fundamentals in terms of profitability, positive cash cash flow, revenue momentum and growth, and all that plays into your ability to be able to get and service debt. So what we're seeing is that debt is still available. It's actually significantly more available than equity in today's market, but it comes with a price. Many of the debt providers are private lenders, not traditional banks, and they're taking advantage of the supply and demand imbalance for their capital. But what they're paying attention to now, unlike the last round of capital markets, is that, you know, the companies have to be— have to perform, and they have to be of significant size and scale to be able to weather these setbacks, these periods of challenge. So I think that debt is, you know, still a very efficient way to fund growth. Certainly, not dilutive like equity would be. And even though it is expensive, it's still cheaper than the returns that you have to offer your equity investors. But again, a company ultimately is going to have to repay that debt and have to be able to service the high interest rate charges. So it's available, but it's available to far fewer candidates than previously where the capital was flowing much more freely because people just thought that the industry tailwinds were in force and that these companies, no matter what happened, they're going to continue to grow just by virtue of the industry phenomenon. But basically now there's much more discrimination, much more selectivity among the creditors to provide the debt. In terms of it being a long-term strategy, in every capital structure, there's always a healthy balance between debt or no debt if a company is averse to that, and equity, and it has to be properly balanced. We've seen situations, Trip and I, with companies that have gotten themselves into some real trouble because they're overleveraged and now those lenders are starting to foreclose. So, you know, I think it's a good strategy provided that the debt is available to you as a borrower, but you have to be very cautious about the amount of debt that you that you put onto your capital structure.

Absolutely. You had mentioned an interesting word, foreclose. It's a bit of a scary word. I think we're facing an environment here with what were previously tailwinds, as you framed it, in the industry, making debt a little bit more accessible or just capital just a little bit more accessible as far as investors' perception of what's driving the value. And now as we're facing some headwinds or a little bit more skepticism with regard to the continued forces on growth in the industry, there's going to be a natural tightening here. So when some of these, potentially some of these overleveraged companies, uh, you know, have trouble servicing that debt or, or getting, uh, you know, finding additional resources as they need to continue. Uh, sounds to me like there's going to be more forces towards consolidation, um, that, uh, you know, without, uh, without traditional bankruptcy generally available in cannabis companies, uh, we're going to see sort of more private consolidation. Am I, am I, uh, Am I on the right track here as far as what you may think about expecting to see here for the rest of 2022 and 2023?

Yeah, no, there's definitely gonna be continued consolidation for a couple reasons. One is efficiencies. You're seeing that among some of the largest MSOs, take Cresco and ColumbiaCare for that matter, and it gives them a greater geographic footprint, gives them greater economies of scale, There are certainly synergies and cost rationalization. You're seeing a lot of asset divestitures that are byproducts of those integrations, which is giving rise to additional sort of a second wave of M&A consolidation as those assets get disposed. And when I said foreclosure before, it could take the form of the lender foreclosing or the company putting itself up for sale as the only viable alternative and using that buyer to either assume the debt or retire the debt as part of the transaction. So I think that with capital being scarce and companies operating with very little reserves, they have no choice really but to, if they can't get the capital, to sell. And there's certainly a large acquisition appetite out there by stronger, larger players to consume those businesses.

And just to add to Peter's statement, Jason, I mean, the irrational exuberance which existed over the last couple of years, certainly in the heyday, I mean, that's pretty much dissipated. I mean, the level of sophistication that we're seeing on the lending side with these debt lenders is really impressive. I mean, these are seasoned veterans that have been operating well outside of the cannabis industry for 3, 4 decades alone and bring that level of experience which if you can get, if you can pass muster with those lenders, it potentially creates a very, very strong partnership that can be either short or long. Again, if you can pay back that debt, which Peter points out, but the fact of the matter is, is that these are experienced lenders that also have experience in ensuring that they get paid one way or another. And although bankruptcy is not, protection that generally any plant touching business can have access to. And counterintuitively, you also have some unique protections because a lender can't walk into, as an example, my facility and capture all of my inventory. It's protected, if you will, under my license. And it would have to be a very, very structured sell-off of those assets. But the fact of the matter is that The companies that are getting access to monies have real asset-based borrowing ability. They have a level of sophistication typically that starts with the founders, the owners of the C-level suite, which we see our lending partners really, really focus on. And then historically, what have they been able to do? Have they defaulted on previous loans or notes, or Did they give away too much of their company too cheap? I mean, they're really looking at those decisions and see if they were based in fact and they were educated decisions. And so, you know, again, there is a tremendous amount of money out there, either actively lending or on the sidelines that I think that good companies will be able to tap into.

Let's pull on that thread a little bit, Trip. You had sort of framed up an issue there about, about lenders, as I like to say, betting on the jockey, not the horse, on the quality of the leaders there in the C-suite, their experience and their sophistication. Maybe you could just sort of go through that because, I mean, as you know, the cannabis industry was led by early on, uh, you know, I'd say, you know, the beginning of the development of cannabis through, say, 2016, 2017, was all, uh, you know, intrepid founders, uh, you know, maybe with some, some background in traditional finance or traditional business, but oftentimes not, uh, you know. And, and it took quite a bit of, um bravery and, you know, sort of caution to the wind to really go after cannabis in those early days, but not what I would call the type of sophistication that lenders are often looking for.

Listen, promoters with a strong entrepreneurial spirit. I mean, that's really what that defining period that you talked about between '14 and '17. That's really what, I shouldn't say majority, but there was a strong subset of cannabis operators, leaders that were those entrepreneurs that were strong promoters. And they subsequently got the job done. That style has traditionally shifted to your point. So I apologize for interrupting, but I agree with you 100%.

Yeah. I mean, it's shifted and, you know, you go to a cannabis conference in 2020 versus 2016. And the biggest difference is the cost of the suits that people are wearing or the fact that there were suits. And, but that seems the way you're describing it seems to be a boon to the industry, quite frankly, that those intrepid entrepreneurs who are able to see their way through the storms, through the early challenges, have sort of matured into more sophisticated C-suite tenants, and then more traditional finance people have come in. It sounds to me like you're framing that up as a boon and sort of a benefit to growing access to capital in cannabis.

Yeah. And Jason, it's not just the finance professionals. I think it's all across the management and operations. You're just seeing a much more enhanced team. And again, some of the OG, the legacy operators, they were being able to continue to operate and attract capital because there was so much euphoria around the industry itself. Again, there's been a lot of purging of businesses that have gone out and management teams that have turned over. And what you're what you're now seeing is just a much better quality business and a quality leadership in the businesses. And those are the companies actually that are the best candidates for capital today because the financial performance speaks for itself and that's attributed by and large to the management team. But where investors are paying much more close attention to is the caliber and the background and credentials of the professionals that are stewards of their capital.

Yeah.

So Trip, maybe you could speak for a minute about how that narrative about the advancing sophistication of the operators, the people who are behind these companies, behind these licenses, combined with the consolidation, may affect the sort of conversations you have with legislators may affect things like safe banking. Do you think that generally is a talking point when you're talking to legislators, whether on the federal or state level, about, well, now you know who these businesses are, they may be a little bit more familiar, a little bit less mom-and-pop, so to speak?

Well, for full disclosure, I don't talk to those political types much anymore because that's not my core focus like it was from the early days and sitting on all these various boards and being at the tip of the spear. Fortunately for the industry, there are individuals that are far more sophisticated than I having those discussions. The reality is that, listen, from even the early days, cannabis as an industry has a tremendous and powerful sway within elected officials. In Colorado, more people voted for the legalization of cannabis than they did our former president. People started to understand the power, not only of the industry and specifically that the winds of political change were present, and now we are seeing obviously, a significant majority of the country offering some access, to cannabis and now significant parts of the world. But in addition to that, the money has always been real and our ability to donate to political action committees and to campaigns. And so it is rare that a politician will snub the industry. At bare minimum, they'll probably be net neutral or will tease with the fact that they're gonna get to it in this next administration or a period of time where they're in office. Having individuals that can, what I'll describe, control the narrative rather than letting the narrative control us is incredibly important. And the level of sophistication with respect to our lobbyists and political operatives is very, very significant as opposed to what it was back in 2010 and '11, when I think about our feeble attempts to try and influence. But I'll use Colorado as an example, and our current governor, Governor Polis, although you may not agree with all of his political positions, talk about a guy that is incredibly bullish on cannabis and truly sees the value of it for our state, both socially, both economically and both as a leader within the United States. And so all those facts are materially presented or presenting the industry in a very, very positive light. Yes, we're gonna continue to have issues. This is not something that's ever been done before. And so it's gonna take time. We're gonna make mistakes as stakeholders in the industry, but generally speaking, states, are benefiting immensely from it, from tax dollars, and so is the federal government. You know, my business pays both federal and state taxes. And, you know, ironically, there's a tremendous amount of hypocrisy there that we're paying all that money into the federal government, but yet we're still quote unquote fighting them, if you will.

So we've got about 20 minutes left here. If any of our attendees have questions, if you want to get a couple of questions in here for Trip or Peter, we're going to be wrapping up in about 20 minutes. So go ahead and use that Q&A feature there. Peter, let's just go back. Let's just head back over to you. And if we could just focus on the public markets, we talked about sentiment generally being down, way down. Right now and the public market valuations being down. Is there going to be more blood in the streets here? Are we sort of hitting the bottom and are ready to bounce up as far as public company valuations?

Yeah, I don't think so in the near term that we're going to see any recovery, and I don't think we've hit bottom either. What'll be very telling, of course, are these public companies' earnings announcements. And it just takes one bad one to send the entire sector into a tailspin. But I don't think that we've seen the worst of it. There's still, as I said earlier, a tremendous amount of oversupply. And you're seeing that not only in the effects of that, not only directly in the companies that are doing cultivation, but even in the ancillary companies like GrowGeneration. Where they've seen same-store sales off more than 50%, which is just off the charts. So I think with continued underperformance and losses and negative trends, that's going to cause the cannabis stocks to slip even further. Now, with that said, many of them are way off of their highs and they're trading at maybe 3 to 4 times EBITDA. And those are good valuations. I mean, on a relative basis to where they've been. So there could be some more correction in the market, but some of these stocks where the companies are showing some intrinsically good fundamentals, I think they could be good buying opportunities. But the problem is that nobody wants to kind of Not nobody, I'm speaking in general terms, but the market in general doesn't necessarily want to take a chance. So as Trip said, there's all this capital that's waiting on the sidelines just to see what unfolds over the next few quarters. And as soon as there's some sign of stability or at least a slowdown in the negative trends, you will see capital come back into these businesses, driving the valuations back up. Probably not to their historical highs because they were tremendously inflated and overvalued by any measure, but you will start to see some pickup in the volume and in the pricing.

So we've got a question here from Brian who asks a timely question, really. The question is whether Canada and the Canadian stock exchange is still the preferred route for going public, for going public transaction or for listing for cannabis companies, or if there are other countries that may be sort of in the business of legalizing cannabis that may be better vehicles. I think I know the answer to this question. I think the CSE is still, the Canadian Stock Exchange is still the preferred route here, even as US exchanges may be loosening a little bit slowly. Do you agree with that, Peter?

Yeah, because one, it's federally legal in Canada and the exchanges there are much more open and liberal to plant-touching companies. Here in the US, If you are plant touching, of course, you cannot be NASDAQ or New York Stock Exchange traded. And so when you relegate yourself to the OTCB or the OTCQ markets, you just don't generate enough volume and enough credibility. So I think the Canadian stock exchange will continue to thrive as long as the US stock exchanges, the major exchanges are restricting Canadian cannabis stocks. And the thing about it though, is that these companies that have managed to go public in Canada, most of them through reverse mergers or the SPAC, it hasn't really done much for them because there hasn't been capital that has been raised in those transactions. A company just becomes public as a result of merging with a public— a private company merging with a public shell, but there typically is not analyst research coverage that follows those companies. And there's not an aftermarket market maker, if you will, in the stocks to continue to stabilize them. And then additionally, because those going public transactions were not a direct IPO offering, there hasn't been capital that's flowed into those businesses. So they are public, but they're sort of quasi-public because there's really no platform or vehicle for them to be able to use that public trading status to raise capital. Yeah, so, or provide liquidity, or provide liquidity, Jason, for the shareholders who are now public shareholders in those businesses.

All the hassle of the, uh, of all the filings and all the headache of, uh, being a public company with a little of the benefit.

That's right. Yeah, because you're right, in addition to that, there is the administrative burden of being public as well as the expense of filing and being a public company. So yeah, it's not always the best solution.

I mean, the key to the public markets is having access to the institutional and retail investor. And to answer that gentleman's question succinctly, I mean, the CSE probably presents the largest pool of investors outside of the United States that Peter mentions, certainly beyond Mexico and certainly beyond Germany. So for better or for worse, the CSE or the TSX is what we have to work with. And if we're gonna go public route, although there's all the perils and pitfalls that Peter mentions, not the least of which is maintaining a public listing, we've seen a tremendous amount of companies go that route and not realize how expensive it is. And now in effect, you're running two companies, one which is your plant-touching business, the other one is your pubco, and equally challenging to run with its own unique difficulties. So caveat emptor, if you will, buyer beware when you're taking that route.

I think you won't see as much of that as we used to.

But the good news is I think you also see some massive mergers that have taken place. I'll use the Pharmakid-LiveWell as an example, which clearly has aspirations and are waiting patiently for the markets to correct themselves. And I think once we get to a point of inflection where it starts to trend up and to the right, you're going to see some really, really blue-chip filings taking place. So that's hopefully before the end of the year.

We'll see.

Peter and I differ a little bit of opinion, but it's coming for sure.

Obviously, you know, we haven't said it yet today, but we should say it: none of this is investment advice. We're going to talk about a specific listing here, Bright Green, we've got a question about, which was listed on the NASDAQ. It's a plant-touching business, is listed on the NASDAQ probably, what, about 2 months ago now, 3 months ago, early May, end of April, I don't remember the exact dates, but has had a very bumpy ride of Any thoughts specifically about Bright Green and what we've learned from them thus far? I know they've had a lot of hurdles to get through, to say the least. And I don't know any insider information here. To be clear, I don't know anything other than what's publicly available about Bright Green. And in fact, I don't even know a whole lot about publicly available about Bright Green, but I know that they have had some difficult hurdles to get through as they are looking for DEA approval, for example, to cultivate cannabis for scientific research. Peter, Trip, you have any thoughts about what you've seen with Bright Green's experience?

Yeah. I can't comment specifically on Bright Green because I, like you, Jason, I'm not that familiar with the business itself, but the timing of their transaction couldn't have been worse in terms of their public debut. And just the window in which they entered the market was not favorable at all. And that incidentally is has implications for a lot of companies that had planned to file this year and go public, which have put those plans on hold because it's just not an attractive time. But I don't know enough about Brightgreen to comment intelligently.

[Speaker:DAVID_SHERMAN] Yeah, I mean, a cautionary tale. Some of the best deals are deals that you don't do. And so maybe it would have been prudent to delay. Again, I don't have any insider information. And although I'm not a lawyer, I'm smart hard enough to know when to keep my mouth shut. It's disappointing because it may have set up some additional and new obstacles that we otherwise may not have faced had they not chosen to take that route. But, you know, we'll see. Jason, did we lose you?

Oh, there you are.

Okay. Looks like Jason is frozen in time.

I think my connection may have tripped there for a moment.

No pun intended.

Thank you. I'm back. I missed the second half of your answer, but I think I got the gist of it.

Yeah, Trip.

And yeah, cautionary tale to be sure. And no doubt others are watching and learning from this. So that might be another sort of, you know, sort of obstacle for companies to sort of consider as they're moving forward. We don't have any other questions in the queue right now. And we've got about 10 minutes left, Tripp and Peter. We've gone through private markets, public markets. We've talked a little bit about federal legislative changes. We've talked a little bit about life in the C-suite and who populates those seats right now. What have we not talked about? About. Peter, Tripp, sort of open question here. What would you like to share with our audience while we have 5 or 10 minutes left?

Okay. You know, I think if you break down the industry into individual sectors, you know, sub-verticals, if you will, there are certain pockets of businesses that, you know, are more favorable than others. You know, as I said, right now retail in terms of M&A activity continues to lead the charge in terms of capital raising. It's more of the ancillary businesses that I see being successful in that regard. And I think we've talked about the oversupply and the plummeting of the wholesale prices, particularly in Colorado and California. And again, I think as that inventory gets consumed within the infrastructure in the system, you'll see a recovery in those prices. So I think California's down, but it's not out. You still see a lot of brands that have emerged from these early legalized states that are forging partnerships now. That's what another trend we should comment on is that in order to expand out of state, that the businesses have elected to go asset-light and to find already an existing licensed operator in other states. To produce and market and distribute those brands. And with some of the larger states now legalizing adult use, such as New Jersey, New York, these brands are trying to exploit and take advantage of those markets. So I think we're going to see more and more of that in anticipation of federal legalization so that these products and brands can position themselves to already have awareness in those markets even before federal legalization. A lot of our clients have done that and we're seeing Michigan and Pennsylvania and as I said, New York and New Jersey take on proven brands that in the states in which those brands originated because it's more of a sure thing than trying to start up a brand in a new market.

I wear multiple hats, but my primary hat is working alongside Peter to find ways in which to support these cannabis businesses. But I've got a strong management team that runs my day-to-day business, which is still plant touching here in the state of Colorado. And it never ceases to amaze me. I mean, you're seeing a real strong interest from mainstream consumer packaged goods brands that are coming into the space. I'll use Jones Soda, which is an iconic craft soda company out of the West Coast, has now launched Mary's Jones. You have brands each and every day, and even though people think that Colorado's mature, brands looking to access to the market. You know, as a manufacturer of infused products, that's a strong indication that our sector of the industry is gonna continue to have the ability to grow. Not all brands are gonna survive and not all brands are going to convey to sort of what I'll call consumer loyalty. But also in the state of Colorado, you're seeing a true branding of flower. Think of the Cookies of the worlds and that has traditionally not been the place here or not been the case here in the state of Colorado. That is starting to have more prevalent play. And so these are all segments of the industry that I think have generally been overlooked, much to my chagrin, since I was pounding that drum for the first decade. But retail is always going to play an incredibly important role. And as Peter mentioned, tremendous activity there. But the fact of the matter is more and more brands are coming into the space from outside of traditional cannabis. And I think that bodes well for the industry overall.

Great. Well, you know, uh, this is some somewhat typical— we're getting a bit of a crush of questions here at the very end, and only about 5 minutes left, so I'm not going to be able to get to all of them. And before we go at the end, I think we've got time for one more, so I'm going to pick, pick, pick, uh, this great question about social equity. Licenses, which has been a, you know, has been a recent development in the cannabis industry in the last couple of years. Several states have implemented or, you know, added into their laws sort of social equity licenses to diversify the owners, the operators, the nature of the businesses, not just ultra-large, but sometimes micro licenses, but oftentimes these social equity licenses have their own particular challenges, particularly with raising money. There's just less collateral out there— I'll just go with the shorter term— for those businesses to lend off of. Peter, as you mentioned earlier, that's sort of a real key for lenders to look at. And there's less experience on the part of the C-suite, as Trip was harping on. So, you know, any tips for these social equity licensees about, you know, when it comes to approaching lenders and how they raise money?

Well, let me just chime in because I'm actually dealing with a client right now in Arizona that is still early stages, but I know I can speak for Peter. We're both strong proponents that every market have some social equity component into it. Generally, a segment of society that's been overlooked or potentially been discriminated against for a myriad of reasons. So, you know, certainly they deserve a place at the table. But fundamentally, these state regulatory agencies should not preclude social equity license holders who have gone through the arduous process of winning those, or should I say earning those, to allow them to align with non-social equity investors or non-social equity businesses. It just, or potentially just to sell and profit from it. And so my opinion is like states like Arizona, which are now starting to soften and allow those social equity license holders to sell. And when I say sell, sell a majority, of their position, you know, that's long overdue. And whether they choose to run the business or they choose to take a less controlling interest, I think shouldn't matter. And giving these businesses that have some aspect or some component of a social equity participant the ability to win, I think is incredibly important because that will beget future investors down the road for the next generation of those applicants, those specifically BIPOC, you know, investors or business owners that, you know, deserve again to have a place at the table.

Yeah, but I'm gonna go back and challenge Trip a little bit on that point, 'cause while I do believe in the principles behind social equity and to try to give reparations to, as Trip said, an overlooked segment, it still comes down to your ability to manage a business successfully. So even though these licenses are being given to social equity candidates, if they don't have the managerial acumen, it's just gonna, it's gonna be challenging not only to attract capital, but to be able to run that business, you know, as a going concern over a long period of time. And so, you know, when some of these social equity licenses get granted, you find that the businesses don't necessarily thrive or they're structured in such a way where the social equity candidate who was able to get the license doesn't necessarily equally get to share in the economics of the returns because they're really just there in name only to get the license. But often there's a management team that is ascribed to that business that really gets the spoils of the returns. But again, it all does come down to the quality of the management, whether you're a social equity license holder or or not.

I think these are great points. They're both great points. I don't think they're contradictory at all. I think they sort of go hand in hand and complement each other. I think that these social equity licenses are here to stay. I think we're going to see more of them, and I think finding solutions to these issues is going to be key to ensuring that it's a successful sort of policy initiative. For the states that do take them on. That is going to wrap it up. We have run out of time. Thank you very much, Tripp and Peter. Thank you. Thank you both very much. I'd like you to, if you could just share your best contact, is it LinkedIn or email or some other way? What's the best way for people who didn't get their questions answered or want to get in touch with you directly after this event? What's the best way, Peter, to reach out to you?

Uh, email would be great. I, I look at email religiously, um, multiple times a day. Um, prosenberg62@gmail.com.

Yep, same for me, Jason. We're a pretty closely held company, so we don't do any advertising or have any strong presence online. Uh, it is Peter and I and then some trusted associates. But my email is Trip, first name, last name, Kieber, tripkieber@gmail.com. And certainly, uh, I probably don't check it as frequently as Peter, but certainly daily. So we're greatly appreciative to you and to Rob certainly for giving us this platform to share our opinions related to the industry.

Thank you. I'm honored that you shared an hour of your valuable time with us and shared some of these great insights. This has been a lot of fun. I'd love to have you back next year and see where we are. After some of these predictions, and hopefully we'll be back on the upswing when we come back this or next year. Thank you, thank you both.

We'll be here.

Well, thank you again, and I hope you have a wonderful rest of your week. For everybody else, thank you for joining. Come on back July 27th, the last Wednesday of the month. Keep an eye out on your email for a link to this recording. Go ahead and share it with your friends, your colleagues, the cannabis investor that you know in your life. Go ahead and share it with a friend and, and keep an eye out on your email for the announcement about the next Cannabis News Key. So thank you all very much and have a wonderful day.

Thanks, Peter.

Thanks, Jason.

Good day.

Bye-bye.