The cannabis industry is evolving, and investors are increasingly focusing on one crucial aspect: a company’s ability to generate cash flow. With potential regulatory changes like cannabis rescheduling on the horizon, companies are preparing for both immediate stability and long-term growth opportunities.
This is according to Brandon Harshbarger, president of Cheech & Chong Global Holdings. In an exclusive interview with Benzinga, ahead of his appearance at the Benzinga Cannabis Capital Conference, Harshbarger highlighted the key factors driving investor decisions in the cannabis space.
Cash Flow and Market Position: The New Investor Mantra
Harshbarger emphasizes the clear message from investors: “Nearly all investors we speak with have made it clear that the ability of the business to generate real cash flow in the near term is a requirement.” As the cannabis market matures, speculative growth is taking a backseat to financial stability and sustainability. Investors are seeking companies with a proven track record of profitability and a strong financial foundation.
Regional Focus Over M&A Frenzy
Harshbarger also observes a shift in strategy among multi-state operators (MSOs). “We see very little in terms of large M&A deals because the established MSOs have their regional footprint and are more focused on protecting their geographical moats than going on acquisition sprees,” he explains. This move toward regional consolidation and defense is a response to the industry’s wait for federal regulatory changes, particularly the potential reclassification of cannabis to Schedule III.
Preparing for Regulatory Shifts
Harshbarger points out that many companies, including his own, are preparing for this regulatory shift: “There is definitely a holding pattern as everyone waits for the change to Schedule III, and that makes sense to me.” This strategic pause allows businesses to focus on building a solid foundation and preparing for the opportunities that a more favorable regulatory landscape could bring.
Looking Ahead: Opportunities for Growth
While the current environment may seem cautious, Harshbarger remains optimistic about the future. He believes significant opportunities await companies ready to capitalize on a more favorable regulatory landscape. “Internally, we have our plans, and when that happens, we think there will be huge opportunities for brands that have shown they can be successful nationally,” he added.
As the cannabis industry watches regulatory developments closely, businesses like Cheech & Chong Global Holdings are focusing on staying competitive, building strong financial foundations, and preparing to take advantage of upcoming changes. The Benzinga Cannabis Capital Conference will be a critical platform for industry leaders and investors to discuss these developments and navigate the evolving landscape of the cannabis industry.
