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Despite Recent 7-Figure Raises, Cannabis Investments Remain Slow In 2020

August 21, 2020 1:40 pm
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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!


8/10/2020 – 8/14/2020


  • Transactional Activity: Week 33 ended August 14, 2020, saw a 158% higher dollar volume with two fewer transactions vs. the prior week of this year and a sharply lower dollar volume and number of transactions vs the prior-year period. We recorded 6 capital raise transactions totaling $51.8 million, vs 8 transactions totaling $417.1 million during the same week in 2019. The average tranche size was $8.6 million this week, vs. $ 52.1 million in the prior-year period. Last year’s totals were skewed by the $350 million Bespoke Capital SPAC IPO.
  • Largest Cap Raise: On August 13, Hexo Corp. (TSX:HEXO) (NYSE:HEXO), completed its C$34.5 million (US$25.5 million) at the market equity program, selling 33.9 million shares between June 18, 2020, and July 31, 2020, at average prices of approximately US$0.75 per share. The large Canadian LP stocks have performed particularly badly in 2020 relative to their US counterparts, declining approximately 40% YTD compared to a gain of approximately 23% for an index that includes U.S. companies. Hexo is down 49.7%, worse than all other LPs except Aurora (down 53.6%) and Tilray (down 53.9%). The 8 Canadian cannabis companies we track with enterprise values above US$250 million now trade at median multiples of 3.5, and 11.6 times 2021 Revenue and 2021 EBITDA respectively. This compares to the 3.2 times 2021 revenues and 12.5 times 2021 EBITDA that we show for the 11 U.S. cannabis companies we track in the same enterprise value range.  These statistics highlight the dramatic sea-change in valuation we have seen during the year. Historically, U.S companies traded at lower EBITDA multiples than their Canadian counterparts but this has flipped, at least for the larger (and mostly better situated) U.S. companies. This is striking given the lack of economies of scale and punitive tax 280e tax regime that the U.S companies continue to face. This could reflect perceptions that the chances for Federal legalization have increased due to COVID-19 and potential Democratic wins in the upcoming elections.
  • Public vs. Private Cap Raises:  4 of this week's 6 capital raises were closed by public companies. So far in 2020, public companies have accounted for 80% of all capital raises, vs. 67% for the same period in 2019. In 2020, public companies have accounted for 88% of total dollars raised, vs. 72% for the same period in 2019. Cannabis stock prices have increased by over 30% since the end of June, however, week 33 saw a 1.0% decline in our 27 stock index, which was the first decline in 6 weeks. The market paused this week to digest the earnings reports of a large number of major cannabis companies. 
  • Public Company Listings: Of the 4 public company capital raises, all are listed in Canada (2 on the CSE and 2 on the TSX) and all 4 also trade In the U.S. (3 on the OTC and 1 on the NYSE)
  • Equity vs. Debt Cap Raises:  Equity-based capital raises accounted for all 6 of this week’s deals including 3 of the 6 deals $10 million + deals closed during the 3rd quarter to date.  
  • Largest Debt Raise: We tracked no closed debt transactions in week 33.
  • Cap Raises by Sector:  The 6 capital raises this week were spread across 4 different industry sectors with two in Cultivation & Retail, two in Software/Media, one in Biotech/Pharma and one in Infused Products & Extracts.


  • Transactional Activity: Week 33 saw 2 M&A transactions, vs 7 in the prior-year period. Though M&A activity is still far below the levels seen in 2019, we continue to see a pickup in transaction volume. This is likely driven by increases in the stock prices of cannabis companies, giving them a more valuable transaction currency.
  • Largest M&A Transaction: On August 11, Jushi Holdings. (JUSH: CSE, JUSHF: OTC) closed a $37 million acquisition of Pennsylvania Medical Solutions, a subsidiary of Vireo Health (VREO: CSE, VREOF: OTC), which holds a permit for cultivation and operates a 90,000 square foot co-located cultivation and processing facility. The cash utilized in this acquisition came from the July 31 debt issuance that we discussed in our week 31 commentary. Pennsylvania has become one of the most attractive medical markets in the country with expected sales of $400-500 million in 2020, nearly twice the levels from 2019. Pennsylvania is the fifth most populated state in the country and it is increasingly viewed as a near-term candidate for adult-use legalization.
  • Public vs. Private: One of this week’s two acquisitions was made by a public company as has been the case in 92% of M&A transactions closed in 2020.  Public companies, particularly with the recovery in stock prices and fundraising ability, have been the dominant acquirers in the cannabis industry. Both of the acquired companies were subsidiaries of public companies. We are seeing a trend towards increased utilization of acquisitions as a means of gaining critical mass in existing markets rather than as a means of entering new markets. Private companies remain the dominant targets for acquirers, except for the growing number of sale-leaseback transactions, many of which have been done by large public MSOs.
  • M&A by Sector: Buyers came from 2 different sectors: Cultivation & Retail and  Investment/M&A.







Capital Raises by Week

Capital Raises by Sector


M&A Activity by Week

M&A Activity by Sector


Photo by Javier Hasse.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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