Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry November 23rd - November 27th, 2020
December 2, 2020 (Investorideas.com Newswire) KEY INSIGHTS & TAKEAWAYS
- Transactional Activity: Week 48 ended November 27th, 2020, saw a $158.1 million lower dollar volume with two more transactions vs. the prior week of this year and a 62.4% higher dollar volume with four more transactions vs. the prior-year period. We tracked six capital raise transactions totaling $27.6 million, vs. two transactions totaling $17.0 million during the same week in 2019. The average tranche size was $4.6 million this week, vs. $8.5 million in the prior-year period.
- Largest Cap Raise: On November 23rd, 2020, 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF), the second largest competitor in Washington state with a growing presence in Illinois, Massachusetts, Michigan, and California, completed its previously announced bought deal prospectus offering of 24.64 million units at C$0.70 per unit (US$0.54) for total gross proceeds of C$17.25 million (US$13.20 million). Each unit consisted of one common share and one half of a common share purchase warrant with a term of 24 months and an exercise price of C$0.90 per share (US$0.69) (a premium of 25%). We value this warrant at approximately C$0.095 (C$0.048 per unit), giving a net stock price of C$0.65 for the raise, a 28.6% discount to its C$0.91 closing price on the prospectus date. 4Front stock closed at C$1.00 (US$0.77) per share on November 30th and trades at approximately 11.4x 2021 consensus EBITDA estimates, a modest discount to the 12.6x we calculate for the fourteen analyst-covered U.S. cultivation and retail sector companies we track with market caps over 100 million. The company announced its third-quarter results on November 30th with revenues up 18% over the 2nd quarter and its first positive adjusted EBITDA quarter of $3.7 million. The company is making good progress in improving its liquidity and financial flexibility. 4Front will use the US$13.2 million equity issue proceeds together with the proceeds from an upcoming $30 million sales leaseback transaction (scheduled to close within two weeks) to pay off its $33.5 million Gotham Green secured convertible note maturing in November 2021. Proforma for these transactions, 4Front will have approximately $16 million of cash and $43 million of debt maturing in May 2024. The company is now fully funded to complete its 185,000 square foot production facility in Commerce, California, and open its second Illinois retail location in Calumet City and its retail location in Brookline, Massachusetts. 4Front does have an upcoming ambitious capital project called the ”Big Daddy,” a significant expansion of Illinois cultivation capacity that is expected to require approximately $50 million of financing. The company believes it can obtain this financing on a non-dilutive basis, and a clear demonstration that it is on track to achieve its guidance of $40-50 million of adjusted EBITDA for 2021 will be the key to its success.
- Public vs. Private Cap Raises: All 6 of this week's capital raises were closed by public companies. So far in 2020, public companies have accounted for 82% of all capital raises, vs. 65% for the same period in 2019. In 2020, public companies have accounted for 81% of total dollars raised, vs. 69% for the same period in 2019.
- Public Company Listings: Of the six public company capital raises, all are listed in Canada (5 on the CSE and 1 on the TSX), and 4 also trade on other exchanges (1 on the OTCQX, 2 on the OTCQB, and 1 on the FSE).
- Equity vs. Debt Cap Raises: Equity-based capital accounted for five of this week's six closed raises and 92.8% of the dollars raised.
- Largest Debt Raise: On November 23rd, XS Financial Inc (CSE: XSF) (OTCQB: XSHLF), a specialty finance company providing equipment leasing to cannabis and hemp companies, announced the closing of a US$2 million senior secured revolving credit facility with an FDIC insured bank with a term of two years and a rate set at the greater of 8% or Prime +4%. The loan is prepayable at any time with no penalty. The use of proceeds is to fund additional equipment leases. On November 30th, XS reported 3rd quarter results with strong revenue growth and a swing to positive adjusted EBITDA. The company has a portfolio of 14 active lease programs with an unlevered IRR of 24% and a lease to value ratio of 57.6%. Recent new leases include a $5 million lease agreement with Greenpeak Innovations, Michigan's leading vertically integrated cannabis operation, and a $5 million contract with a large MSO focused on Nevada and Massachusetts.
- Cap Raises by Sector: The six capital raises this week were spread across five different industry sectors with two in Cultivation & Retail, one in Biotech/Pharma, one in Hemp, one in Investments/M&A, and one in Consulting Services.
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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