Extracted Episode 11: Finance and FOMO with Aaron Salz
When it comes to the cannabis financial markets, there’s an abundance of information to navigate. It’s up to investors to do their due diligence and distinguish facts from fiction. On this episode of Extracted, we’re joined by a thought leader in the investment space, Aaron Salz, to get his insights into the current market landscape.
Aaron Salz is the founder of Stoic Advisory, a Toronto-based corporate finance advisory firm focused on the global cannabis industry. Aaron has previously been the acting CFO for Tokyo Smoke & Lift, and is a pioneer analyst in the cannabis sector. He has been quoted in the Financial Post, Bloomberg and Financial Times, to name a few. Needless to say, he is an excellent person to talk to about evaluating companies and what’s next on the horizon.
Opening up a dialogue.
While the role of Aaron’s company isn’t to provide stock tips (it’s focused on mergers and acquisitions), he feels a personal responsibility to help people set realistic expectations amid the industry’s many lofty claims. This protective nature is a big reason why he is so active on Twitter and has opened himself up to Ask Me Anything on Reddit. “It’s like a Robin Hood sort of thing,” Aaron says about his attempts to shed light on what the capital markets are really like.
Do your due diligence.
Making informed decisions is a key component to investing, and really any business transaction. For Stoic, Aaron says their evaluation depends on the company and jurisdiction. In more advanced jurisdictions like Canada, his firm conducts due diligence on the principals and capital structure as that’s where he says the majority of deals can fall apart.
“People and capital structure are things we check out before we even start to consider what the business plan is.”
But what about the average investor who likely isn’t looking deeply into corporate structures? Aaron says that having a diversified portfolio is important and recommends investing the majority of that into larger cap, blue-chip names. Instead of making decisions based on FOMO (fear of missing out), which was a big part of what drove the cryptocurrency investment craze, Aaron says people need to get informed and think long-term.
“It’s really just FOMO. FOMO drives so much in this space from an investment standpoint, from the retail level up to the institutional level. It’s the worst reason to invest in things.”
Edibles and extracts up next.
The recreational market in Canada has been slower to develop than many expected. Aaron says it’s because a large component of the product offering is missing. He points to some of the US markets where edibles, extracts, and vapes make up 50-60% of the demand. It’s also no surprise that retail sales are lower in the provinces that don’t yet have a strong brick and mortar presence. on them for education and innovation in the world of cannabis.
“I think a big part of why retail and recreational sales have been so slow out of the gate here is obviously we just don’t have the products that people want.”
Aaron compares the current recreational market to the legs of a stool, acknowledging that we really only have one leg right now – flower, albeit in a limited capacity. To add the other legs to the stool, he says we need concentrates, edibles, and extracts. Within this new product potential, Aaron says he’s most interested in the vape pen market. He’s wary of the beverage market due to the “high stakes” of large beverage companies getting involved. He says it also requires technology for a much better delivery system. Of course we’re a tad biased, but we’re pretty excited to show what our Sorse Emulsion Technology can bring to the table.
Cannabis means opportunity.
Before cannabis began gaining momentum in finance, Aaron saw an opportunity to carve out a niche in an industry that was lacking expertise on Bay Street. Beyond the obvious career and financial opportunities, Aaron sees cannabis as “an opportunity to enhance your health, an opportunity to enhance your lifestyle.” Whether it’s helping a family member replace alcohol with cannabis for pain relief, or hearing the stories of cannabis’ impact on veterans, Aaron knows the true opportunity for cannabis extends far beyond the capital markets.
To learn more about the investment side of cannabis, listen to the full episode.