Hi Hunterwotthanks for liking my posts.Your question relates to...

Hi Hunterwot

thanks for liking my posts.

Your question relates to scaling a loss making pre-revenue enterprise such as CAN/AC8 versus scaling a loss making post-revenue enterprise like LGP/ AGH.

Scaling (growth) of an enterprise is valuable when the following assumptions marry up:

1. An upfront investment is required to create or purchase an asset which will essentially produce free cash later on
2. The cost of the upfront asset (CAPEX) will return many multiples of invested capital (MOIC) over the long term
3. The magnitude of the MOIC and the timeline to recoup the CAPEX dictate the quality of the investment measured as an IRR
4. The CAPEX invested creates some form of barrier to entry or competitive advantage and allows the company to monetise an income stream that they would otherwise not be able to.
5. The magnitude of the monthly loss will gradually reduce with time to reach breakeven and future profitability

The CAN model of building a cultivation facility to grow high quality cannabis and sell it for a price superior to other market participants is a massive punt. I don't see a strong future.

The AGH model of building an extraction facility for $30m and trying to recoup the costs when their cost to acquire one patient is in excess of the sales revenue they recoup from every patient is madness. To have a MOIC of 2, they would have to recoup $60m and this would take over 10 years based on their current figures.

The LGP model of being a cultivator on a small scale and using an outsourced extraction facility and selling to as
many markets as possible seems borderline but potentially profitable.