The Cannabis Capital Markets Are Ready To Catch Fire
Trade to Black presented by Flowhub is hosted by Anthony Varrell solo this episode while Shadd Dales is still away. Anthony welcomes Sammy Armenia, a senior figure at C21 Investments, for a wide-ranging conversation on capital markets, consolidation, and the investment thesis for cannabis equities. Together they’ll break down the current state of cannabis capital market activity, what investors and operators are seeing across the sector, and where capital is actually flowing in today’s market. From debt and equity financing to investor sentiment and public market dynamics, this discussion takes a close look at how cannabis companies are navigating one of the industry’s most important turning points.
Armenia describes C21’s Nevada operations as a lean, cash-generative business achieving over $10 million in revenue per door — a standout result in a state market that has contracted from roughly $1 billion to $600-700 million, largely due to hemp displacement. He attributed that loss directly to hemp rather than the illicit market, and expressed confidence that the closing of the hemp loophole would begin channeling consumers back to state-legal retail, though he acknowledged uncertainty about how much would migrate versus finding its way to illicit channels instead.
The conversation shifted to the mechanics of a potential sector rerate following rescheduling. Armenia outlined multiple bullish catalysts beyond the commonly cited elimination of 280E, including lower cost of capital, credit card acceptance, organic growth from hemp loophole closure, and inorganic growth through mergers and acquisitions. He noted the sector currently trades at roughly one and a half times revenue and seven times EBITDA, compared to fifteen times revenue and seventy-five times EBITDA at its 2021 peak, and suggested a rerate to five times forward revenue was plausible if growth reignited. On consolidation, both he and Varrell agreed that major mergers between top-tier operators would generate enormous synergies — Boris Jordan had previously cited $200 million between two large companies — though the absence of a viable stock currency means most near-term deals will likely be mergers of equals or distressed asset acquisitions rather than premium transactions.
The pair also devoted significant time to the structural deficiencies plaguing cannabis equities. Armenia was candid that these mechanics predated the MSOS ETF and exist across many illiquid market segments, pushing back against narratives that blamed the ETF itself for the sector’s poor price action. Both agreed that the most constructive path for retail investors is to diversify broadly, dollar-cost average into individual names with conviction, and think in terms of a three-to-ten year horizon.
