Does Going Public Even Matter? A Hot Topic To Debate At Benzinga's Cannabis Capital Conference In Chicago

The Benzinga Cannabis Capital Conference, a highly anticipated event in the cannabis industry, is returning to Chicago on September 27-28, following a successful gathering in Miami last April.

As a significant platform for cannabis companies, this conference showcases the industry's growth and presents a unique opportunity to delve into the decision of going public or staying privately held.

Let’s explore the advantages and disadvantages of going public and analyze how this choice can impact the success and growth of cannabis businesses.

Going Public

• Access to Capital: Going public provides cannabis companies with the opportunity to raise significant capital. By becoming publicly traded, these companies can attract a broader investor base, including institutional investors. This influx of funds can support expansion efforts, research and development initiatives, and strategic acquisitions.
• Enhanced Visibility and Branding: Listing on a stock exchange can substantially enhance a cannabis company's visibility and brand recognition. Publicly traded companies often gain media coverage and attract attention from analysts, which can attract more customers, partners, and potential investors. Moreover, being publicly traded can lend credibility and legitimacy to a company's operations and products.
• Liquidity and Exit Opportunities: Publicly traded stocks offer liquidity to shareholders, enabling them to easily buy and sell shares. This liquidity can be appealing to early-stage investors and employees who seek to monetize their holdings. Additionally, going public can create potential exit opportunities for founders and early investors through secondary offerings or mergers and acquisitions (M&A).

Disadvantages of Going Public

• Regulatory and Compliance Burden: Public companies face more stringent regulatory requirements and reporting obligations compared to private ones. Complying with securities regulations, financial reporting, and disclosure obligations can be time-consuming and costly. Failure to meet these requirements can result in legal and reputational consequences.
• Loss of Control: Going public often leads to ownership and control dilution as new investors enter the picture. Shareholders possess voting rights, and a sufficiently large shareholder base can influence strategic decisions and corporate governance. Founders and early investors may find their influence over the company's direction reduced.
• Short-Term Market Pressures: Publicly traded companies are subject to market fluctuations and short-term performance pressures. Meeting quarterly earnings expectations and navigating stock price volatility may shift the focus towards short-term results rather than long-term growth and innovation. This can hinder a company's ability to invest in research and development or pursue strategic initiatives that require time to yield results.

The decision to go public or stay private is crucial for cannabis companies and success requires strong leadership, strategy and adaptability to navigate regulations and markets. Learn more about cannabis finance from the experts at the next Benzinga Cannabis Capital Conference in Chicago on September 27-28.

Photo: Courtesy Of Mathieu Stern On Unsplash