Cannabis Industry Chart Of The Week: SPACS Underperform The Marijuana Market

SPACS have been a significant part of the cannabis landscape since the late 2017 IPO of Cannabis Strategies Acquisition Corp, now AYR Wellness. Twenty-three Cannabis SPAC IPOs have been completed for total proceeds of $4.24B.  Of these, 5 SPACs with original IPO proceeds of $920M acquired non-cannabis businesses ranging from Wine to Space. Eight representing initial IPO proceeds of $1.72B, merged with cannabis-related companies, and 10 representing original IPO proceeds of $1.60B are still either looking for deals ($1.2B) or have transactions pending ($.4B).

The graph is arranged in chronological order with the oldest de-SPAC deal on the left.

The green bars depict the annualized total returns of each company since its qualifying transaction, while the orange dot represents the annualized total return of the MJ Alternative Harvest ETF over the same period.

Given the significant downward draft of cannabis stocks over much of 2021, it isn't surprising that all of the total returns are negative.

More surprising is that only two of the companies, Columbia Care CCHW and AYR Wellness AYR, outperformed the broad cannabis ETF.

• We see several broad themes in the performance of the group

  • AYR Wellness AYR and Columbia Care CCHW have been rewarded for their aggressive acquisition programs in limited license states.  AYR has outperformed the broader index by 25%, and Viridian Capital Advisors equity research considers it a top pick.

  • California competitors in the group have been harshly punished.  In the 11 months since its de-SPAC transaction TPCO GRAMF is down 85.5% ( 88% annualized). Similarly, Glass House Brands GLASF in the less than six months since its de-SPAC is down 65.7% (73% annualized).  Ironically, TPCO and GLASF were the two largest IPOs on the list at $575M and $402.5M, respectively.

  • The most recent SPACs have had a less receptive market to use their stocks as acquisition currency. 

• The group's performance may help explain why the most recent SPAC IPO, Canna-Global had to use a full warrant in its $230M IPO last week.  SPAC investors may be becoming a bit more cautious.  

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis and hemp industry. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

Industry Sector (one of 12 sectors, from Cultivation to Brands)

Dollar value of the transactio

Region in which the deal occurred (country or U.S. state)

Status of the company announcing the transaction (Public vs. Private)

Deal structure (equity vs. debt)

Key deal terms (Pricing and Valuation)

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 $50 billion in aggregate value.

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