Marijuana Business Magazine July 2019

Marijuana Business Magazine | July 2019 74 How similar or different is your past work at Goldman versus your work at Salveo? I used to do all public market stuff, which meant looking at listed equities, convertible bonds, corporate bonds. The big difference now is that we are looking for our entry into private rounds that are being done: seed rounds, Series A and B rounds. At Goldman, I was analyzing larger companies. But there are loads of transferable skills, because when you’re evaluating these companies, you’re evaluating the business model, the management team. The due diligence is not that different. Can you explain how you calculated valuations then and now? We used a lot of comparables when we were evaluating companies. We were always looking for relative opportunities, and sometimes our group was very trading-focused, so we would look within sectors and say, “Consumer products: Here is the enterprise value to the EBITDA multiple that this comp set is trading at.” It’s more earnings-based than revenue- based, but it was trying to look for outliers and companies we thought were cheap or expensive and, more importantly, had a catalyst. With the potential for federal legalization and U.S. marijuana companies listing on big exchanges here, do you think fewer U.S. cannabis businesses will go public in Canada? Cannabis equity markets are currently suffering a bit of indigestion—some of it caused by companies that listed prematurely and have traded poorly on their debut. The mad rush to list in Canada is likely to slow as public market investors become more discerning, which is ultimately healthy. The Acreage-Canopy deal (where Canada’s Canopy Growth agreed to buy New York-based Acreage Holdings once the U.S. government removes federal prohibition) is a unique option structure and probably a smart move for Canopy. Does it signal the Canada trade is over? In a sense, it does. You want to buy the rumor and sell the fact. Canada was a great trade up to legalization. The opportunity now is to rotate out of Canada and into U.S. names. Canadian investors are looking to take their gains in Canada and put that money to work in the United States. That theme has a lot of room to run. CURRENT COMPANY Salveo Capital, cannabis investment firm, Chicago CURRENT POSITION Portfolio adviser WALL STREET COMPANY Goldman Sachs, London WALL STREET POSITION Managing director and head of the Fundamental Strategies Group, a department of research analysts within the securities division’s equity and credit businesses TOM MAZARAKIS ″Canadian investors are looking to take their gains in Canada and put that money to work in the United States . That theme has a lot of room to run.″ Hustle America