In recent years, the legalization of medicinal and/or recreational (i.e., adult use) cannabis has steadily increased across a majority of states within the United States. Currently, 30 states (including Oklahoma, as of June 28) have legalized medicinal cannabis and three more states could pass medicinal cannabis legislation before 2018 is over. Nine states (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont and Washington) and the District of Columbia have legalized the adult recreational use of cannabis, and voters in Michigan (and potentially North Dakota) will have the opportunity to legalize adult recreational use of cannabis in 2018, while voters in Utah and Missouri will have medical marijuana related initiatives on the ballot this year as well.

As the legal cannabis industry expands, so have investment opportunities for cannabis businesses. Veridian Capital reported “65 capital raises [for cannabis businesses] in the first five weeks of 2018, with an average size of about $19 million,” and nine capital raises above $50 million.[1] Given the legal, regulatory, and economic complexities associated with operating a cannabis business in the current market, however, investors looking to participate in the cannabis industry are forced to answer a number of difficult questions including this one: How do you value a cannabis business? A cannabis business is different than a computer software business, for example, not least because the business is both licensed and legal at the state level yet criminal under current federal law.

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