Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry August 24th - August 28th, 2020

September 2, 2020 (Investorideas.com Newswire) KEY INSIGHTS & TAKEAWAYS

CAPITAL RAISES

• Transactional Activity: Week 35 ended August 28, 2020, saw an 89% higher dollar volume with one more transaction vs. the prior week of this year and a sharply lower dollar volume and number of transactions vs the prior year period. We recorded 5 capital raise transactions totaling $73.4 million, vs 8 transactions totaling $150.1 million during the same week in 2019. The average tranche size was $14.7 million this week, vs. $ 18.8 million in the prior year period. Last year’s raise largely consisted of an $85.5 million preferred stock offering by New Lake Capital, a $30 million series D offering by Hound Labs Inc., and proceeds of $27.3 million from warrant exercises by TerrAscend.
• Largest Cap Raise: On August 25, Ascend Wellness Holdings, LLC (AWH), a private, vertically integrated, multi-state operator with assets in Illinois, Michigan, Ohio, Massachusetts, and New Jersey announced the final closing of a $68.2 million Series C funding round which included $41 million of new proceeds. The funding will enable AWH to continue to scale its operations, build out its retail locations and complete its simultaneously announced acquisition of Modern Cannabis (MOCA) which will add well-known dispensaries in two Chicago neighborhoods – Logan Square and River North. Investors in the Series C round were not disclosed but several groups have been consistently present in AWH previous rounds including JM10 Capital, Poseidon Asset Management, Salveo Capital, and Shire Capital.
• Public vs. Private Cap Raises: 3 of this week's 5 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 84% of total dollars raised, vs. 70% for the same period in 2019.
• Public Company Listings: Of the 3 public company capital raises, all are listed in Canada (1 on the TSX and 2 on the CSE) and all 2 also trade on secondary markets (1 on the FSE and 2 on the OTC).
• Equity vs. Debt Cap Raises: Equity-based capital raises accounted for 4 of this week’s 5 capital raises and accounted for 99% of the funds raised.
• Largest Debt Raise: We tracked only 1 debt transaction in week 35. Citation Growth Corp. a multi-state operator with cultivation, production, and retail assets in Nevada, California, Washington, and British Columbia, closed a US $0.59 million units offering in which each unit included US $1000 face amount of 10%, two year subordinated debentures with 2000 two-year warrants at a premium of approximately 75% over the common stock trading price at the issue date. The issue is extendable at the company’s option to a final maturity of 4 years. The effective cost of this issue is surprisingly low at only 10.23%. The 30% warrant coverage, aggressive 75% premium, and relatively short two-year maturity, combine to reduce the warrant package value to nominal levels, keeping the effective cost near the coupon. Citation earns a relatively low credit ranking on our Viridian Credit Tracker system. Out of the 86 companies we track in the Cultivation and Retail sector with market capitalizations below $100 million, Citation ranks as #68 based on its very high market leverage, constrained liquidity, and negative cash flow. Also, the company has not yet filed its year ended March 31, 2020, financial statements, so the most recently available financial data is from 12/31/2019. The stock got a boost today when the company announced that it would file its interim statements for the quarter ended June 30 by October 12 but the market remains skeptical. Citation stock has declined 11% since May versus the 19% gain for our 27 stock index.
• Cap Raises by Sector: The 5 capital raises this week were spread across 2 different industry sectors with four in Cultivation & Retail and one in Software/Media.

MERGERS & ACQUISITIONS

• Transactional Activity: Week 35 saw 1 M&A transaction, vs 7 in the prior-year period. Although the number of M&A transactions completed year-to-date is down 85% vs the comparable period of 2019, we continue to see anecdotal evidence that the M&A climate is improving from the increased numbers of letters of intent and increased due diligence activity. We also expect to see increased activity from SPACs.
• Largest M&A Transaction: On August 26, Costa Canna Production Limited Liability Partnership, an entity led by Canada’s Cowichan Tribes, purchased the United Greeneries' licensed cannabis cultivation and processing businesses located in Duncan, British Columbia from Harvest One for cash consideration of US $6.2 million. In conjunction with the transaction, Harvest One will also enter into a licensing agreement for the distribution of Cannabis 2.0 products.
• Public vs. Private: This week’s only acquisition was made by a private company, although 91% of M&A transactions closed in 2020 have been made by public companies (up from 70% in 2019). Public companies, particularly with the recovery in stock prices and fundraising ability, have been the dominant acquirers in the cannabis industry. Private companies remain the dominant targets for acquirers.
• M&A by Sector: This week’s one buyer came from the Cultivation & Retail sector.

VIEW DEAL TRACKERS

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

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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.

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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&Amp;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;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.

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