CKRELL APITAL Cannabis Investment Report | December 2017
OY
digital media. We further divide each segment into multiple subsegments. Each segment has unique opportunities and risks. For example, companies that possess, manufacture or distribute cannabis (commonly known as “touching the plant”) face risks related to violating federal law—and state-law compliance obligations—not generally faced by providers of business software or digital media con- tent. Many businesses operate in multiple segments, and we expect industry leaders to emerge in each segment. The five primary segments and their subsegments are illustrated in the following chart.
Cannabis Industry Segments
E eae iS d Business Business quipmen an Software Services Supplies
Distribution Digital Media
Online Content Online and Networking Directories
Consumer Products Vaporizers and Accessories | Involves “touching the plant” [| Does not involve “touching the plant”
In our view, valuations and stock price fluctuations in the cannabis industry continue to be driven more by expectations for the cannabis industry in general than by individual company fundamentals. Today, in the public markets for cannabis-related companies, trading volumes are too low, trading prices are too volatile and operating histories are too limited to place any reliance on current valuation levels. We believe that this dynamic will continue until cannabis-related companies have matured and start to realize meaningful revenue, profitability and other financial metrics that will allow investors to evaluate companies within the industry by more traditional methodology.
It is still too early to know how the cannabis industry or its sectors will be valued in the future. It may come to pass that companies in the cannabis industry are valued comparably to public companies in industries with similar characteristics, such as the alcohol, tobacco, pharmaceutical and consumer products industries, especially as companies from those industries look to enter the cannabis industry, through acquisition or by other means. What is clear now, however, is that investors will continue to have a range of investment opportunities from which to choose in this rapidly growing, dynamic industry.
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