The cannabis industry is growing exponentially, yet businesses are struggling to secure the funding necessary to start up and grow.
"The reality is that there's very, very little new capital entering the space right now."
That's according to Matt Hawkins, the founder and managing partner of Entourage Effect Capital, who joined the Benzinga Cannabis Capital Conference Tuesday in Chicago, Illinois, to talk about investment risks and opportunities in the cannabis space.
Hawkins joined three other investing experts - Todd Harrison, CB1 Capital’s founding partner and CIO, Emily Paxhia, Poseidon Asset Management LLC’s managing partner and co-founder and Joseph Skoff, the managing director of institutional equity sales at Canaccord Genuity Inc. - in a panel discussion moderated by Tim Seymour, the founder and chief investment officer of Seymour Asset Management, as well as a regular contributor to CNBC.
What Are Investors Waiting For?
Canaccord Genuit's Skoff said that investors are waiting to get visibility on the regulatory front to deploy their capital.
There is a "significant amount of institutional capital they can invest in the stocks," Skoff continued, adding that they need more catalyst coverage.
CB1 Capital’s Harrison said that investors are waiting for "the signal" - the passage of federal cannabis banking reform.
"They're looking for that signal, and I think that signal could become SAFE Banking," he said.
The lawmakers recently reviewed the piece of legislation, first introduced by Colorado Rep. Ed Perlmutter, during a Senate Banking Committee meeting focused on insurance issues. In June, the Senate rejected, for the sixth time, the bipartisan marijuana banking legislation in the final version of the United States Innovation and Competition Act (a.k.a The America COMPETES Act).
However, Harrison is also expecting changes around criminal justice reform, including clemencies at the federal level and expungements at the state level.
"If you had to wait another year to get all these people out of jail and to get the veterans the protections they need to research and all these other elements … it's really not that long to wait to get to do the right thing," Harrison said.
Sentiment Is Improving
Poseidon's Paxia seconded Harrison's stance on criminal justice reform, adding that listing cannabis business on NYSE and NASDAQ exchanges "would change everything."
Moreover, Paxia said that sentiment seems to be improving – though slowly - once external factors are separated from the actual state of the cannabis industry.
"Sentiment is still kind of lagging behind where I think these businesses are," Paxia added.
