Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry October 5th - October 9th, 2020
October 14, 2020 (Investorideas.com Newswire) KEY INSIGHTS & TAKEAWAYS
- Transactional Activity: Week 41 ended October 9th, 2020, was a relatively light week in cannabis capital raises with a $51.6 million lower dollar volume with one more transaction vs. the prior week of this year and a 90.0% lower dollar volume with 1 fewer transaction vs the prior-year period. We tracked 6 capital raise transactions totaling $8.25 million, vs 7 transactions totaling $82.6 million during the same week in 2019. The average tranche size was $1.4 million this week, vs. $11.8 million in the prior-year period.
- Largest Cap Raise: On October 7, 2020, Elixxer Ltd. (TSX: ELXR) (OTCQB: ELIXF), a cannabis investment company with significant interests in Australia, Jamaica, Switzerland, Italy, and Canada, raised C$4.0 million (US$3.02 mill.) from AIP Convertible Private Debt Fund L.P. in a secured two-year term loan with an interest rate of 17%. The eye-popping rate is only one of the features that make this deal expensive. A combination of C$200,00 in facility fees, C$250,000 in closing fees, C$75,000 in due diligence fees, and 46.3 million shares were paid to the lender, and the total value of these fees and shares totaled approximately 24.7% of the gross proceeds. Treating these amounts as an OID, we calculate the effective cost of this loan to be 34.6%. The Viridian Credit Tracker ranks Elixxer #14 out of the 22 Canadian Investment sector companies with market caps under US$25 million that we track. The company ranks #17 on our leverage measure; however, this transaction, by increasing proforma debt by 50% and increasing proforma liabilities-to-market-cap to 2.8X, would push its leverage ranking to #18.
- Public vs. Private Cap Raises: 4 of this week's 6 capital raises were closed by public companies. So far in 2020, public companies have accounted for 80% of all capital raises, vs. 66% for the same period in 2019. In 2020, public companies have accounted for 84% of total dollars raised, vs. 69% for the same period in 2019.
- Public Company Listings: Of the 4 public company capital raises, all are listed in Canada on (3 on the CSE and 1 on the TSX), and all 4 also trade in the U.S. on the OTC.
- Equity vs. Debt Cap Raises: Equity-based capital raises accounted for 5 of this week's 6 capital raises and accounted for 63% of the funds raised.
- Largest Equity Capital Raise: On October 9, 2020, Deep Desert Beverage, Inc., a private new entrant into the THC-infused drink market, raised US$1.65 million in a Series B funding round. Proceeds will be used to finance the buildout of the company's Nevada City facility and prepare the company for a planned product launch in the first quarter of 2021.
- Cap Raises by Sector: The 6 capital raises this week were spread across 4 different industry sectors with two in Software/Media, two in Investment/ M&A, one in Biotech, and one in Infused Products & Extracts.
MERGERS & ACQUISITIONS
- Transactional Activity: Week 41 saw 1 M&A transaction, down from 5 in the prior-year period. Although the number of M&A transactions completed year-to-date is down 77% vs the comparable period of 2019, we continue to expect increased activity in the remainder of the year.
- Largest M&A Transaction: On October 7, CB2 Insights (CSE: CBII) (OTCQB: CBIIF) (“CB2”), “one of the largest integrative healthcare systems in the United States” closed its acquisition of Texas-based Maverick County Medical, a primary care medical and wellness clinic with about 10,300 patients. CB2 plans to leverage its current telemedicine infrastructure to provide access to patients across Texas. The total purchase consideration of C$0.98 million (US$0,74 mill.) will be paid in cash, 50% at closing, and 50% following 6 months from the date of the transaction. The purchase price represents .61 times 2019 revenue and 3.4 times 2019 net income. The acquisition follows closely after a US$3.8 million CB2 private placement of equity In September 2020. CB2's stock price is up over 200% YTD.
- Public vs. Private: This week's sole acquisition was made by a public company. Year-to-date, 92% of M&A transactions closed in 2020 have been made by public companies (up from 71% 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: The buyer in this week's deal came from Software/Media sector, while the target was from the Miscellaneous Ancillary sector.
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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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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