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Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry December 14th - December 18th, 2020


December 23, 2020 ( Newswire) KEY INSIGHTS & TAKEAWAYS


  • Transactional Activity: Week 51 ended December 18th, 2020, saw a $27.4 million volume decrease with one more transaction vs. the prior week of this year and an $11.6 million decrease with one less transaction vs. the prior-year period. We tracked six capital raise transactions totaling $137.8 million, vs. seven transactions totaling $149.4 million during the same week in 2019. The average tranche size was $23.0 million this week, vs. $21.3 million in the prior-year period.
  • Largest Cap Raise: On December 18th, 2020, TerrAscend Corp. (CSE: TER)(OTCQX: TRSSF), the 5th largest U.S. cannabis company by market cap, closed a $120 million, four-year maturity, Senior Secured Term Loan with a 12.875% rate. The issue is solely secured by the company's Pennsylvania-based Illera Healthcare Division, which owns and operates a 144,000 square foot cultivation and manufacturing facility in Waterfall and three dispensaries in Plymouth Meeting, Lancaster, and Thorndale. Proceeds will fund the remaining 2021 Illera earn-out payments. One key benefit of the term loan structure is the immediate callability of the debt. Proforma for this transaction, TerrAscend will have total debt of approximately $204.6 million and a debt/market cap of only .09, maintaining its high place in the Viridian Credit Tracker ranking system. Following last week's AYR strategies deal, this transaction further demonstrates that investors are now willing to accept MSO credit risk without equity kickers. AYR and TerrAscend rank #6 and #8 respectively in the Viridian Credit Tracker rankings, and the deals were priced within 1/8% of each other.
  • Public vs. Private Cap Raises: All six of this week's capital raises were closed by public companies. So far in 2020, public I have accounted for 83% of all capital raises, vs. 64% for the same period in 2019. In 2020, public companies have accounted for 81% of total dollars raised, vs. 68% for the same period in 2019. Larger public companies have superior access to capital, and as shown in this week's Viridian Chart of the Week, they also receive higher valuation multiples.
  • Public Company Listings: Of the six public company capital raises, all are listed in Canada (3 on the CSE, 2 on the TSX, and 1 on the NEO), and all six also trade on the OTC.
  • Equity vs. Debt Cap Raises: Equity-based capital accounted for four of this week's six closed raises and 13% of raised proceeds.
  • Largest Equity Raise: On December 15th, Auxly Cannabis Group Inc. (CSE: XLY)(OTCQX: CBWTF), the 10th largest Canadian cannabis company by market cap, announced the closing of a C$13.8 million (US$10.87M) bought deal short form prospectus offering of 46 million units at C$0.30 per unit (US$0.24). Proceeds will be used for working capital and other corporate purposes. Each unit was composed of one common share and one-half of one common share purchase warrant with a strike price of C$0.40 per share (US$0.32)(a premium of 39% to the closing price on the transaction date) and a three-year maturity. We value the warrants at approximately C$0.026 per unit, giving a net share price of C$0.28 per share, quite close to the closing price of C$0.29 per share. Auxly's enterprise value represents approximately 2.2X consensus 2021 revenues, modestly below the median of 2.8X for the median of the 18 Canadian cultivation and retail companies we track with market caps over US$50 million. Although the company has been making progress in reducing its opex, the market may perceive a risk of further dilution. Auxly is not yet EBITDA positive, and given their current cash burn rate, we estimate that this financing will provide them with about 3 quarters of liquidity before they will require additional funding. Auxly has raised about US$7.4 million in the debt market during 2020 through 4 tranches of 7.5% convertible notes, but the debt has been expensive. Effective costs have come down from 22.6% in May to around 17.3% in September, but Auxly's proforma debt/ market cap of .54 highlights its relative credit weakness. The company has the 3rd highest market leverage of the group of 18 comparable Canadian companies.

Cap Raises by Sector: The six capital raises this week were spread across four different industry sectors: three in Cultivation & Retail, one in Software/Media, one in Infused Products & Extracts, and one in Investments/M&A.


  • Transactional Activity: Week 51 saw one completed M&A transaction, up from none in the prior-year period. The number of completed M&A transactions year-to-date is down 72% vs. the comparable period of 2019. Still, we are now beginning to see the acceleration of deal activity that we have been forecasting. The Tilray/Aphria deal is important because it signals a new phase of Canadian market rationalization aside from previously announced capacity curtailment. We do not believe we will see similar mergers of any major U.S. MSOs, but we expect MSOs with better access to capital to expand their capacity in newly adult legal states and solidify their positions in limited license states that are ripe for adult legalization in the next 24 months. Columbia Care's announced $240 million acquisition of Green Leaf Medical is a good example. Green Leaf is a private MSO whose operations will propel Columbia into one of the leading positions in cultivation, manufacturing, wholesaling, and retailing in Pennsylvania, Maryland, Virginia, and Ohio. Other examples are the two acquisitions announced today by AYR Strategies: a $290 million acquisition of Liberty Health Sciences, making the company a top tier integrated competitor in Florida, and the $101 million acquisition of the membership interests of Garden State Dispensary, a New Jersey licensed operator with three dispensaries as well as cultivation and processing facilities. Viridian does not include these acquisitions in our Tracker database until they close; however, they are emblematic of the increased pace of M&A activity we are observing.
  • Largest M&A Transaction: On December 17th, 2020, 4Front Ventures Corp. (CSE: FFNT)(OTCQX: FFNTF) closed the sale and leaseback of its cultivation and production facilities in Olympia, WA, and Georgetown, MA with Innovative Industrial Properties for US$33 million. The proceeds will be used to pay off the outstanding senior secured debt obligation to Gotham Green Partners. We view this transaction as credit positive, increasing financial flexibility while being essentially leverage neutral. In connection with the transaction, 4Front issued approximately 12.1 million warrants to LI Lending in exchange for LI waiving security on the Georgetown property, which was previously part of the lender's collateral package. We value the warrants given LI Lending at approximately US$1.7 million using Black Scholes option pricing.
  • 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). Particularly with the recovery in stock prices and fundraising ability, public companies have been the dominant acquirers in the cannabis industry. Private companies remain the principal targets for acquirers.

M&A by Sector: The buyer in this week's transaction came from the Investments/M&A sector, and the seller was from the Cultivation & Retail 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

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.


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 ( 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.

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.

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