Cannabis M&A Dries Up Amid COVID-19 Pandemic, But Raises Don't Stop

The Viridian Cannabis Deal Tracker is an information service that monitors capital raise and M&A activity in the legal cannabis industry. Each week the Tracker analyzes/aggregates all closed deals and allocates each transaction to one of twelve key industry sectors in which the deal occurred (from Cultivation to Brands), the region in which the deal occurred (country or U.S. state), the status of the company announcing the transaction (public vs. private) and the type of deal structure (equity vs. debt). The Viridian Cannabis Deal Tracker provides the deal data/terms/valuations/structures and market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital and M&A strategy. Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $45 billion in aggregate value. Find it exclusively on Benzinga Cannabis every week!

INVESTMENT AND M&A ACTIVITY IN THE CANNABIS INDUSTRY

3/30/2020 - 4/3/2020

CAPITAL RAISES

As was the case for the month of March, COVID-19 continued to negatively impact capital raises during the Week of March 30 – April 3, in the midst of an already weak capital raising environment for the cannabis industry.
We recorded 4 capital raise transactions totaling $38.6 million, vs. 14 transactions totaling $191.4 million for the same period in 2019.
All 4 cap raises were by companies in the Cultivation & Retail sector. This sector has dominated investor interest for more than 4 years, and in the midst of the COVID-19 pandemic, has become an even more dominant sector at the expense of the Hemp and Infused Product sectors which had been attracting more investment capital towards the end of 2019. We believe that this is due to the underlying asset portfolios of Cultivation & Retail companies (real estate, manufacturing facilities) that offer asset protection for lenders.
Three of the four transactions were debt-based financings, continuing a predominant trend in the industry we’ve been reporting on for the last year. Of these, two were convertible note offerings which comprise the majority of debt financings in the industry as lenders achieve the best of debt and equity – a secured position with a current coupon, and the potential upside of converting into equity. We expect that debt-based financing will continue to dominate the investor landscape as depressed equity valuations make it prohibitive for companies to issue new equity.

MERGERS & ACQUISITIONS

We recorded 1 M&A transaction, vs. 14 in the prior year period.
The slow market for M&A is a direct fallout from the decline in the market valuations of public cannabis companies that have been the predominant acquirers in the industry. Weaker stock prices and a diminished ability to raise capital has hurt the “buying power” of these public companies.

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WEEKLY SUMMARY