How to Start a Cannabis Business: Equity vs debt investing sin stocks
There has been a significant shift in cannabis debt issuance from equity-linked debt to straight debt.
In the early debt days of 2018, nearly all cannabis debt issues were convertibles, and many issues had additional attached warrants to achieve total coverages of over 100%.
As the U.S. MSOs became EBITDA positive in 2020, issuance of straight coupon debt began in earnest. Most of the top MSOs have now completed straight coupon issues in $100M+ sizes at rates between 8% and 10%.
This shift reflects the industry's growing maturity and profitability.
Summary
*Sin stocks hedge during economic uncertainty
*Sin clauses, SRI and ESG may come at a financial cost
*Sin stock’s benefits in addition to being recession proof, generating strong and consistent earnings, and having limited competition
*Historical evidence on the performance supports sin stock’s higher alpha
*Sin stocks plausible underperformance due to “shunned-stock hypothesis”
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