Image of a cannabis plant, used on blog about cannabis industry

Cannabis Inc Has Problems But They Aren’t What You Think

If there’s anything that has, in recent times, dominated the financial news agenda as much as the rise of cryptocurrencies, it’s probably marijuana. Day after day, the breathless coverage of Cannabis Inc. and the treasures it holds for its gung-ho investors has driven up stock prices in anticipation of legalization. Consider, for example, Canopy Growth, whose stock price shot up by 270 percent over the last year, with a market cap that rivals Air Canada’s.

Cannabis Inc: is there long-term viability?

As the numbers soar and the industry gathers more steam, some skeptics and a handful of bearish investors have begun casting doubts on the stocks’ long-term viability — there are misgivings that companies’ financial reports may be misleading, and comparisons being made to the Dot-com Bubble.

When it comes to financial reporting, the Cannabis industry, which has only just stumbled out of Prohibition, is a bit of a Wild West. Financial metrics, particularly non-standard accounting metrics, are open to a wide scope of interpretation. What it comes down to, then, is trust. It’s important to trust that the legalization of marijuana will skyrocket sales.

Such ominous warnings are, in the world of trading, not unusual. But while there is no cause for alarm yet, there’s a looming problem that needs to be acknowledged: Record Keeping.

The importance of record keeping in the cannabis industry

Record keeping and audit trails help shed light on the crucial details that tell you where your money is going. For example, they show who’s spending what and where. The last time a growing company didn’t care for such trivialities, things did not end well. Just consider Fab, a now defunct e-commerce company. Once valued at $1 Billion, Fab, one of the most exciting tech companies at the time, suddenly realized one Fall morning in 2013 that it had spent $200 Million, with little idea of where that money had gone.

The technology landscape went bust due to a lack of key systems that tracked spending. It would be optimistic to think that the cannabis industry, which is still in its infancy, would fare differently.

What do you think?

Leave a Comment