Investors in the cannabis sector have reached the “show me the money” stage of their financing, but question marks remain over where the greatest returns will emerge.

Financial consultancy PAC Partners said it remained to be seen which part of the value chain will provide the greatest return for investors.

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“Is it cultivation, is it medicine production, is it distribution? The jury is still out,” director of corporate finance Sean Kennedy said.

Sean Kennedy - Cannabis Australia - Cannabiz
Sean Kennedy: These guys are not trading on the sizzle of the sector

However, he suggested the future could be uncertain for companies without cultivation operations, warning those “who don’t control cultivation, don’t control their destiny”.

Meanwhile, Cann Group chief executive Peter Crock suggested the economic slowdown caused by Covid-19 could see “consolidation opportunities” in the market.

The comments came during a conference discussion on capital raising, with Kennedy believing investors are now taking a hard-nosed approach to what has become a more sophisticated sector.

“Investment capital was quite unsophisticated two or three years ago but the guys are a lot more sophisticated now,” he said. “At the end of the day fund managers are cash flow driven, they are not trading these stocks on news flow and the sizzle of the sector, they are looking for strong cash flow returns.

“The industry has gone through several iterations. The sizzle piece of the market was cannabis 1.0, even 2.0, and we are now at 3.0 – show me the money.”