Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry September 21st - September 25th, 2020
September 30, 2020 (Investorideas.com Newswire) KEY INSIGHTS & TAKEAWAYS
- Transactional Activity: Week 39 ended September 25, 2020, saw an $84.9 million higher dollar volume with 2 fewer transactions vs. the prior week of this year and a 34% lower dollar volume and 6 fewer transactions vs the prior-year period. We tracked 7 capital raise transactions totaling $131.6 million, vs 13 transactions totaling $199.8 million during the same week in 2019. The average tranche size was $18.8 million this week, vs. $15.4 million in the prior-year period.
- Largest Cap Raise: On September 21, Trulieve Cannabis Corp, (CSE: TRUL) (OTCQX: TCNNF) the dominant competitor in Florida and one of the most profitable vertically integrated cannabis companies that we track, raised US$86.8 million in an underwritten offering of 4.71 million shares at C$24.50 per share (US$18.41). The use of proceeds is working capital and funding business development including the two acquisitions the company announced this week to become an integrated competitor in Pennsylvania. Pennsylvania market is arguably the second most attractive market in the country after Trulieve's home market of Florida and management's fiscal conservatism is demonstrated by the structure of these transactions. The total consideration includes upfront cash payments of $29 million, upfront share-based payments of $37 million, and earn-outs of up to $75 million in shares based on achievement of EBITDA milestones. This structure keeps dilution to a minimum while not stressing liquidity or balance sheet measures. Trulieve trades at approximately 6.3 times consensus 2021 EBITDA estimates, moderately below the 8.2 times median for the 12 analyst-covered US. Cultivation & Retail sector companies in the Viridian Value Tracker with market caps and enterprise values over US$100 million. Trulieve is also one of the strongest cannabis credits, and we believe it would find a welcome reception for new debt issuance. We rank Trulieve as the #3 credit in our Viridian Credit Tracker behind only Curaleaf and Green Thumb.
- Public vs. Private Cap Raises: All 7 of this week's capital raises were closed by public companies. So far in 2020, public companies have accounted for 81% 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 7 public company capital raises, all are listed in Canada on (5 on the CSE and 2 on the TSX), and 5 also trade on the OTC.
- Equity vs. Debt Cap Raises: Equity-based capital raises accounted for all 7 of this week's capital raises.
- 2nd Largest Equity Raise: On September 24th, Red White & Bloom Brands Inc, (CSE: RWB) (OTC: RWBYF) closed its previously announced bought deal offering of 33.35 million unit offering at C$0.75 per unit (US$0.56) for gross proceeds of C$25.01 million (US$18.73 million). Each unit included a common share and a warrant with a 24-month term and C$1.00 exercise price. We value the warrant portion of this unit at approximately C$0.03 per unit giving a net share price of C$0.72. This coincides with the trading price on August 22 shortly after the deal was announced. The stock has traded down to C$0.58 in the month since the announcement. Red White and Bloom is in the process of transforming itself from a company that historically concentrated on royalty agreement financing to a full-fledged MSO with concentrations in Michigan, Illinois, Massachusetts, California, and Florida. Proceeds from the unit offering will partially fund the US$20 million cash component of the company's recently announced acquisition of Platinum Vape, a profitable premium-branded California company.
- Cap Raises by Sector: The 7 capital raises this week were spread across 3 different industry sectors with three in Cultivation & Retail, three in Software/Media, and one in Hemp.
MERGERS & ACQUISITIONS
- Transactional Activity: We tracked no closed M&A transactions in week 39.
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.
*Copyright © 2020 by Viridian Capital Advisors
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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.
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.
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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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