Helping first-time public company executives understand what’s expected of them
‘A lot of cannabis companies have been started up by individuals who were either serial entrepreneurs or had experience of legacy businesses,’ says Goldberger.
Many companies in the cannabis industry have their roots in small, scrappy, entrepreneur-led businesses. This can often be the case for small and micro-cap public companies in any sector, and transitioning from a fast-growing private company to established public company requires an understanding of good public company governance, disclosure and investor relations. Again, what makes the story of many cannabis companies unique is how quickly they’ve continued to grow and the volatility they have faced once they’ve gone public.
Soliman explains that this is an area where IR can and should be playing a leading role in helping senior management transition into life in the fishbowl of the public markets.
‘IR professionals are playing an important role to make sure management teams that have not been in the public market spotlight are prepared for the shots that come in from investors, especially in a roller-coaster market like cannabis,’ he says.
In addition to focusing on educating management teams on the rigors of being a public company executive, Soliman says IROs can highlight new opportunities.
‘There are ample M&A opportunities in the cannabis space,’ he adds. ‘IR professionals are playing an important role in explaining the shareholder acceptance of – and in some cases demand for – more M&A activity.’
Some IR professionals in the sector have found they have been trusted by their senior leadership team, and given the role and responsibility to provide insight into how to run an effective public company.
This is true for Laura Lepore, vice president of investor relations and corporate communications at MediPharm Labs. ‘We have such a supportive senior leadership team and board that understand the art and science of IR,’ she says. ‘They’re setting an example that this is the way IR should be treated at every company.’
The speed and volatility of the cannabis industry further necessitates a close working relationship between investor relations and senior management teams. This was particularly the case at Canopy Growth Corp last summer, when it was announced that the company’s founder and chief executive, Bruce Linton, would be leaving the company. For Burns, the closeness he had enjoyed with his CFO was crucial.
‘I sat down with the CFO and we thought very intently about how we were going to address [this management change],’ Burns says. ‘You don’t have a lot of time to ponder or analyze. Everything is fast and you have to make swift decisions and move on. We thought about how we wanted to communicate this to the Street. In this industry you’ve always got to be on your toes and thinking about your messaging.’
The companies that see value in hiring an IR representative – whether in-house or through an agency – have implicitly recognized the importance and value of investor relations. But that isn’t always the case, as Goldberger points out.
‘We talk to a bunch of small, very micro-cap Canadian stock exchange listed companies that are pushing back and saying they don’t want to do an earnings call,’ he says. ‘They’re saying that none of their peers are doing it, to which I say, If all of your friends jumped off a cliff, would you?
'These companies don’t know what’s expected of them. This is a retail investor-focused industry for the time being, and you have to give your investors the information they need. You have an opportunity to stand out, and if you don’t do a call and spoon-feed information to your investors, you’re leaving it up to the market to determine whether or not you’re successful.’
Kuzyk believes that as more public company operators start working at cannabis companies, this will improve, as will the best practices around reporting and financial metrics. ‘Our founder and CEO is an operator who built our company,’ he says. ‘He’s a quick study, but he’s never been part of a public company. We’ve been doing some coaching, and have had some excellent counsel form our lawyers and bankers to help him navigate the public capital markets.’
Kuzyk adds that he’s seeing a migration of talent from the energy sector into cannabis companies like High Tide – which has just appointed a new CFO and COO, both of whom have public markets experience.
‘Now that the hype is over, the market is looking to attract real operators,’ Kuzyk says. ‘Continuous improvement is a key theme for the future cannabis industry, and when you can attract better talent, it’s wise to do so.’