Sending a feeler out to the WSO community to see if anyone has experience across Cannabis valuations in today's market. Did a quick search but appears most threads are 5+ years old and the industry is completely different now and changing rapidly. Would be great to hear from other monkeys involved in the industry.
I'm particularly interested in valuing retail dispensaries and what a single dispensary valuation would look like vs. multi-dispensary model. There are lots of unknowns across this industry and valuations are all over the place. Some questions below if anyone has any insight:
- Discount rates: What is everyone using for appropriate discount rates? It's obviously a risky business at this point and the comp sets are limited (though growing every day). How are you discounting future CF and building in the risk of the industry never becoming federally legal, becoming federally legal, states opening up a huge supply of licenses that floods the markets with new entrants, etc? What does an appropriate discount rate truly look like?
- Valuing a vertically integrated company vs. a purely retail-only operation. Better margins will be had with the former but eventually, cannabis will be so commoditized there may be little to no value in being vertically integrated unless required by the state its operating in.
- # of licenses: What premium do you attribute to a business that is operating 20 retail operations with 20 licenses vs. a single retail operation with a single license? Also, those companies that hold the only license in a city vs a retail operation that owns 1 of 20 in a specific city, outside of # of customers, what effects are you seeing?
- Multiples: Multiples are insane right now with many companies with negative EBITDA and being valued off of revenue. Looks like forward-looking multiples 2-3+ years come into reality when companies begin to generate EBITDA and the multiples come back to earth. How are you approaching this?
Seems like more and more boutique PE shops are strategically getting into the ancillary side of Cannabis and slowly moving into the plant touching operations. Would be great to start a conversation. Cheers.