Cannabis Deal Tracker: Investment and M&Amp;A Activity in the Cannabis Industry July 13th - July 17th, 2020
July 22, 2020 (Investorideas.com Newswire) KEY INSIGHTS & TAKEAWAYS
- Transactional Activity: Week 29 ended July 17, 2020, saw 72% lower dollar volume and 50% 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 3 capital raise transactions totaling $14.1 million, vs. 19 transactions totaling $863.8 million during the same week in 2019. The average tranche size was $4.7 million this week, vs. $45.5 million in the prior-year period. The capital raised in the prior-year period was largely composed of a $41 million equity raise by Neptune Wellness (see below).
- Largest Cap Raise: On July 13, 2020, Neptune Wellness Solutions, a company engaged in the extraction, purification, and formulation of cannabis and hemp products, sold approximately 4.8 million shares at US$2.65 per share for total proceeds of US$12.65 million. Proceeds are expected to be used for working capital and general corporate purposes. The share price of $2.65 gives an enterprise value of US$288.2, representing approximately 4.2 times consensus revenue estimates for the fiscal year ending March 2021. Based on the company’s recent cash burn rate of approximately $8 million per quarter and cash balances of approximately $19 million as of 3/20, we would expect the current financing to give Neptune sufficient cash to operate for approximately 3-4 quarters before it requires additional financing.
- Public vs. Private Cap Raises: Of the 3 capital raises, all 3 were closed by public companies. So far in 2020, public companies have accounted for 81% of all capital raises, vs. 68% 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 drifted without clear direction since June, but earnings releases have continued to show stable revenues and profitability despite the COVID weakened economy, spurring improved capital markets confidence in the sector. Several states including Colorado and Oregon have recently reported significantly accelerated cannabis sales volume, reinforcing the industry growth story.
- Public Company Listings: Of the 3 public company capital raises, all 3 are listed in Canada, (2 on the CSE and 1 on the TSX) and all 3 are also U.S. listed (1 on the NASDAQ and 2 on the OTC).
- Equity vs. Debt Cap Raises: Equity-based capital raises accounted for 2 of the 3 transactions and approximately 96% of the proceeds raised. Debt financing has slowed as investors have become increasingly focused on companies’ ability to service debt through internal cash flow but appears to be resurging based on strong reported operating results. Several material debt transactions including approximately $17.4 for MSO Jushi Holdings were announced this week but have not yet closed.
- Largest Debt Raise: On July 16, Blueberries Medical Corp, a Latin American producer of medicinal cannabis and cannabis-derived closed a C$1.0 million, non-brokered private placement of unsecured convertible debentures. The debentures have a 13% coupon, mature in 24 months, and have a conversion price specified to be the lower of C$0.065 per share or current market price (subject to a lower limit of C$0.05). This "at the money" conversion feature adds to the expense of this structure which has an effective cost of 24.14%.
- Cap Raises by Sector: The 2 of the 3 capital raises occurred in the Biotech/Pharma sector with 1 in the Cultivation & Retail sector.
MERGERS & ACQUISITIONS
- We recorded no closed M&A transactions this week however the $700 million, Curaleaf acquisition of Grassroots is expected to close next week according to a press release issued on July 13 by Curaleaf.
The Viridian Cannabis 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 analyzed all closed deals and segments each according to key metrics:
- Industry Sector (one of 12 sectors, from Cultivation to Brands)
- Dollar value of the transaction
- 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
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&Amp;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&Amp;A transactions totaling over $45 billion in aggregate value.
*Copyright © 2020 by Viridian Capital Advisors
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About Viridian Capital Advisors, LLC
Viridian Capital Advisors (www.viridianca.com) is a financial and strategic advisory firm dedicated to the cannabis market. We are a data- and market intelligence-driven firm that provides investment, M&A, corporate development, and investor relations services to emerging growth companies and qualified investors in the cannabis sector. Our banking practice, through broker-dealer Bradley Woods & Co. Ltd. (Member FINRA/SIPC), provides capital and M&A services to fund the growth of our clients, while our advisory practice helps to position and build their businesses. Our team's decades of high level operating and transactional experience on Wall Street in a variety of emerging sectors, allows Viridian to provide comprehensive strategic and financial solutions that assist cannabis enterprises in realizing their full potential.
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