Cannabis Deal Tracker: Investment and M&Amp;Amp;A Activity in the Cannabis Industry July 27th - July 31st, 2020

August 5, 2020 (Investorideas.com Newswire) KEY INSIGHTS & TAKEAWAYS

CAPITAL RAISES

• Transactional Activity: Week 31 ended July 24, 2020, saw an 86.5% lower dollar volume and 40% 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 $34.8 million, vs 12 transactions totaling $142.9 million during the same week in 2019. The average tranche size was $11.6 million this week, vs. $11.9 million in the prior-year period. The capital raised this week was dominated by the $33.3 Jushi financing below.
• Largest Cap Raise: On July 31, 2020, Jushi Holdings Inc., a multi-state operator focused on strategic expansion in limited license states, closed a $33.3 million 10%, 2.5-year senior secured notes with attached warrants transaction. Investor friendly terms allowed the deal to be upsized from its originally announced $15.25 million size. The effective cost of the notes/warrants package was an eye-popping 37%, driven by the 75% warrant coverage in 4.5-year warrants with an exercise price of $1.25, a 30% discount to the company’s closing price on July 31. This warrant package is worth around $14.3 million using the Black Scholes model with a conservative 30% volatility. The warrants include a cashless exercise provision, a feature we are surprised to have not seen more of. Cashless exercise allows the company to issue stock for only the “in-the-money” amount of the warrants, sharply limiting dilution. A standard 19.98 million warrant issue would represent approximately 20% dilution based on Jushi’s estimated fully diluted share count of 99.2 million. We estimate the total dilution with the cashless exercise warrants to be only 13.1% even if the stock doubles. This lower dilution partially makes up for the otherwise high cost of the deal. The use of proceeds is to fund the cash portion of the previously announced Pennsylvania grower-processor permit holder transaction. Pennsylvania, Virginia, Arizona, and Illinois are the 4 states that Jushi is most positive about according to a recent management presentation and the completion of this transaction will allow them a total of 15 retail stores in Pennsylvania, representing 10% of the allowed stores in the state.
• Public vs. Private Cap Raises: 2 of the 3 capital raises, were closed by public companies. So far in 2020, public companies have accounted for 80% 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. 71% for the same period in 2019. Cannabis stock prices have increased by approximately 16% over the last four weeks and were up approximately 5% in the most recent week. Viridian Deal Tracker data shows a clear relationship between cannabis stock prices and both capital raise and M&A activity. The capital markets are gaining confidence in the cannabis industry based on its demonstrated resilience in the face of a weak economy and on renewed hopes for positive legislative developments following the upcoming national election.
• Public Company Listings: Of the 2 public company capital raises, both are listed in Canada on the CSE and both also trade In the U.S. on the OTCQB.
• Equity vs. Debt Cap Raises: Equity-based capital raises accounted for 2 of the 3 transactions but only 2.9% of the proceeds raised, the second consecutive week in which debt has dominated the financing.
• Largest Equity Raise: The largest equity raise of the week was the July 30, 2020, US$1.04 million unit issues by The Yield Growth Corp, a phytoceutical and consumer packaged goods company. We estimate that the warrant attached to the unit is worth approximately C$0.01 giving a net share value of C$.09, slightly lower than the C$.095 closing price on the transaction date. Yield growths enterprise value of approximately US$11 million represents 6.4 times the company’s LTM sales.
• Cap Raises by Sector: The 3 capital raises this week were spread across 3different industry sectors with one each in the Investments / M&A. Cultivation and Retail, and Software/Media sectors.

MERGERS & ACQUISITIONS

• Transactional Activity: Week 31 saw 2 M&A transactions, vs 10 in the prior-year period. Though M&A activity is still far below the levels seen during the first half of 2019, we have begun to see a pickup in weekly activity. This is likely driven by the recently improved stock price performance of public cannabis companies, which have been the dominant acquirers.
• Largest M&A Transaction: On July 27, Columbia Care Inc. closed a $14.0 million sale-leaseback transaction with Innovative Industrial properties. The transaction includes the Company’s dispensary, cultivation, and manufacturing facilities in Vineland, New Jersey, totaling approximately 54,000 square feet. Sales-leaseback transactions continue to offer the lowest financing cost available for borrowers with real estate assets.
• Public vs. Private: Both of this week’s acquisitions were made by public companies as has been the case in 94% of M&A transactions announced in 2020. Public companies, particularly with the recovery in stock prices and fundraising ability, have been the dominant acquirers in the cannabis industry. Of the acquired companies, one was public. 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: Real Estate, and Infused Products & Extracts.

VIEW DEAL TRACKERS

The Viridian Cannabis Deal Tracker is a proprietary information service that monitors capital raise and M&Amp;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;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;Amp;A transactions totaling over $45 billion in aggregate value.

*Copyright © 2020 by Viridian Capital Advisors

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher. No part of this material may be (I) copied, photocopied, or duplicated in any form, by any means, or (II) redistributed without Viridian's prior written consent.

*Disclaimers

The information contained herein is for informational purposes and is not intended as a research report. It should not be construed as Viridian recommending investment in cannabis companies or as a solicitation to buy or sell any security or engage in a particular investment strategy. Investment in cannabis companies entails substantial risk. Before acting on any information, you should consider whether it is suitable for your particular circumstances and consult all available material, and, if necessary, seek professional advice.

Viridian Capital Advisors and its affiliates, as well as their respective partners, directors, shareholders, and employees, may have a position in the securities mentioned herein or may make purchases and/or sales from time to time. Viridian Capital Advisors, through broker-dealer services provided by Bradley Woods & Co. Ltd., (Member FINRA/SIPC), may act, or may have acted in the past, as a financial advisor to certain companies mentioned herein and may receive, or may have received, a remuneration for their services from those companies.

The above information whether in part or in its entirety neither constitutes an offer nor makes any recommendation to buy or sell any securities.

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&Amp;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&Amp;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.

Marijuana remains illegal under federal law. The federal government does not recognize marijuana to have any medicinal value. Marijuana cultivation, possession, consumption, sales, and distribution are illegal under federal laws and also certain state laws. Investors in cannabis may be subject to law enforcement actions. Please note that there are differences in marijuana laws from one state, county, or city to another. Furthermore there are substantial risks associated with investing in cannabis companies, including, without limitation, changes in applicable laws, rules, and regulations, risks associated with the economic environment, the financing markets, and risks associated with a company's ability to execute on its business plan.

Contact Us:

Viridian Capital Advisors, LLC
contact@viridianca.com

Disclaimer/Disclosure: Investorideas.com is a digital publisher of third party sourced news, articles and equity research as well as creates original content, including video, interviews and articles. Original content created by investorideas is protected by copyright laws other than syndication rights. Our site does not make recommendations for purchases or sale of stocks, services or products. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. All investing involves risk and possible losses. This site is currently compensated for news publication and distribution, social media and marketing, content creation and more. Disclosure is posted for each compensated news release, content published /created if required but otherwise the news was not compensated for and was published for the sole interest of our readers and followers. Contact management and IR of each company directly regarding specific questions.

More disclaimer info: https://www.investorideas.com/About/Disclaimer.asp Learn more about publishing your news release and our other news services on the Investorideas.com newswire https://www.investorideas.com/News-Upload/ and tickertagstocknews.com

Global investors must adhere to regulations of each country. Please read Investorideas.com privacy policy: https://www.investorideas.com/About/Private_Policy.asp

Buy a cannabis guest post on Investorideas.com