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Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry October 3rd, 2022 - October 7th, 2022


October 12, 2022 ( Newswire) KEY INSIGHTS & TAKEAWAYS


Transactional Activity:

Two capital raise transactions totaling $24.8M closed this week, one fewer transaction, and a $4.3M lower volume than last week. Thirteen fewer transactions closed than the previous year, and volume declined by $479.0M. This week's average deal size was $12.4M compared to $33.6M last year.

Cannabis capital raises are off 65.5% YTD.

  • Total Equity issuance is off 74.3%, and total debt issuance is down 50.5%.
  • U.S. debt is down only 41.1%, while Canadian debt is down a more significant 78.4%.
  • At 55.0% of total capital raised, debt remains the highest in history for comparable periods.
  • Public companies accounted for 73.9% of total financing YTD, down from 83.2% in 2021.
  • The graph below shows that U.S. activity dominated capital raises for the first thirty-eight weeks of 2022, with 71.5% of all capital raised.

The U.S. Cultivation & Retail sector has experienced a sharper change in capital raise activity

  • Total capital raised is down 71.1%, but equity capital raised is down approximately 96%.
  • Debt financing is down 41.7% YTD and accounts for about 93% of all capital raised; private companies raised a record 37% of it.
  • 62.8% of total capital raises YTD were completed by public companies compared to 79.3% in 2021.
  • In 2022, there have been no equity deals above $25M!


Cannabis stock prices (measured by the MSOS ETF) exploded by 32.4% in reaction to Biden's Friday surprise announcement, marking the largest one-week gain since the ETF began in September 2020.

Despite the outsized gains, cannabis prices finished the week 54% lower YTD and have drifted lower.

The macro-environment remains perilous, and recent job market strength appears to quash the likelihood of a near-term Fed pivot. We continue to believe there is a high likelihood of a recession in 2023.

Meanwhile, the negative industry trends of commodification-driven wholesale price declines, margins weakened by inflation, and pressured consumers, continue unabated.

None of that mattered this week as dreams of near-term legalization took the stage.

We believe the critical near-term importance of Biden's announcement is that his federal pardons and encouragement of states to expunge front runs one of the most contentious issues surrounding the SAFE+ bill. This should significantly increase the likelihood of SAFE+ passing in the lame-duck session. Furthermore, we believe the indirect impacts of SAFE+ will be the most important ones for investors: increasing bank custodial services for cannabis stocks, which we think will eventually lead to greater trading liquidity, a broader investor base, and uplisting.

As to rescheduling, it is likely to take much longer than popular belief. Biden is on record from the campaign saying that he believes cannabis should be moved to schedule 2. This would have minimal positive impact: It would neither provide for a legalized adult-use market, remove 280e, nor result in uplisting.

It is less clear what benefits a downlisting to schedule 3 or 4 would have. On the positive side, it would remove 280e, but on the negative side, it would greatly expand the role of the FDA, an agency with close ties to the Pharma industry. The FDA is unlikely to approve the smokeable flower products that make up most of the adult-use market.

We think the likelihood of complete de-listing is very low, at least in the next 2-3 years.

Our view is that the best-case near-term scenario is the passage of SAFE+ combined with a 280e eliminating down schedule that leaves the states in control of cannabis regulations. Full legalization and interstate commerce would be disastrous for all limited license states and most MSOs. Most states only legalized cannabis for tax revenue: expect them to fight to keep their tax revenues and jobs intact.

YTD Returns by Public Company Category

U.S. Tier 1 companies improved several notches in response to the surprise Biden announcement. Canadian LPs have significantly underperformed the other categories.

The market is strongly differentiating between MSOs. In two months, there has been a 60-point difference between the percentage returns of the best-performing versus the worst-performing MSO. The chart below shows the divergence of stock prices since the end of July.

Best and Worst Performers of the last week and YTD

Jushi Inc. (JUSHF: OTC) was the week's best performer, up 56.1%. The market-beating performance was a bit puzzling since the company focuses on eastern limited license states, which are not the locations that would gain the most from rescheduling or de-scheduling.

Glass House (GLASF: OTC), up 49.6% for the week, is more understandable. It is arguably the best-positioned company for an interstate commerce scenario.

The worst performer was TPCO, down 18.9%. We saw no news to explain the move.


The Week's Largest Closed Equity Transaction:

On October 4, 2022, The Biopharmaceutical Research Company (Private)("BRC"), one a few U.S companies with a production license from the DEA to produce cannabinoids for federally approved researchers announced the closing of a $20M Series A round.

  • The round was led by Intrinsic Capital, with participation by Argonautic Ventures, AFI Capital Partners, Delta Emerald Ventures, and several family offices.
  • Proceeds will allow BRC to scale its operations, increase its product offerings, conduct research and execute its go-to-market strategy.

Another Closed Equity Transaction:

On October 4, 2022, Akerna Corporation (KERN: Nasdaq) issued 500,000 shares of convertible preferred stock for total proceeds of $4.75 million.

  • The preferred was issued at a 5% discount to its $10 par value and is redeemable at the option of the holders for 105% of par for a short period ending 90 days after the offering.
  • The preferred is convertible any time after the reverse stock split at $.25 per share.

Public Company Raises:

One of the companies that raised capital this week is public and trades in the U.S. on Nasdaq.

Equity vs. Debt Cap Raises:

Equity accounted for both of this week's raises.


Debt accounted for 31% of trailing 4-week capital raises, below its LTM average of 61%. Sporadic financing has reduced the correlation between the trailing 4-week debt-to-total financing ratio and equity prices.

The Week's Largest Debt Raise:

There were no closed debt raises in the week ending October 7, 2022.


Transactional Activity:

Five M&A transactions closed this week with a total disclosed transaction value of $188.7M compared to four transactions for $285.0M in the prior year.

Total YTD M&A volume is down 81.0% from 2021, with $4.53B in consideration and 144 deals closed versus $23.82B in transaction value and 267 closings in 2021.

Last year's total included two of the largest M&A transactions ever done in cannabis, the $4.5B Tilray acquisition of Aphria and the $7.2B Jazz Pharma acquisition of GW Pharma. Without the two megadeals mentioned above, the volume in 2022 would trail 2021 by 61.0% YTD.

U.S. volume is down 67.3% YTD, with 39.9% fewer transactions.

The average transaction size of $34.7M is down 45.6% from 2021. Still, 2022's average is expected to grow considerably as large public/public transactions like Cresco/Columbia Care and Verano/Goodness Growth close in the 4th quarter.

Major Pending Deals Risk Arb

  • The Cresco/Columbia deal spread narrowed by 920 bp to 12.6% on 10/7/22. The current spread is still slightly above the average of where it has been since the end of Q2. We continue to expect a late 2022 closing, but it is difficult to predict the impact of high volatility on the risk of both the primary transaction and the required divestitures. We saw no specific news regarding the deal to account for the massive spread narrowing.

Major Pending Deals Risk Arb

  • The Cresco/Columbia deal spread narrowed by 920 bp to 12.6% on 10/7/22. The current spread is still slightly above the average of where it has been since the end of Q2. We continue to expect a late 2022 closing, but it is difficult to predict the impact of high volatility on the risk of both the primary transaction and the required divestitures. We saw no specific news regarding the deal to account for the massive spread narrowing.

Valuation Gap

The valuation gap narrowed to 3.85 on 10/7/22 compared to 2.65 last week and below its 3.96 LTM average. The valuation gap is the difference between the EV/NTM EBITDA multiple for the largest MSOs and the multiple for the less than $300M market cap group, which are their primary targets.

This measure has been a significant driver of M&A activity since a larger gap creates an opportunity for more accretive transactions. The gap tends to increase in improving markets while declining in retreating markets.

A gap of over 4 points is conducive to accretive transactions between the largest MSOs and smaller competitors. At the same time, a tighter financing market makes it more challenging for small companies to finance the growth of their business.

We note that the gap is based on trading prices and not on values where a company could raise significant amounts of capital. The difference is crucial because one of the key drivers we see for accelerating M&A activity is the inability of smaller companies to finance themselves in the current cannabis capital markets.

The Largest M&A Deal of the Week:

On October 5, 2022, Curaleaf Holdings (CURA: CSE)(CURLF: OTCQX), the largest U.S. MSO by market cap, announced the closing of its acquisition of Tryke Companies, a private vertically integrated MSO.

  • Consideration for the transaction consisted of $10M cash and 2.7M shares at closing and $75M cash and 16.5M shares to be paid in three installments on the 1st, 2nd, and 3rd anniversaries of the closing for a total consideration of $181M (valuing Curaleaf's shares at $5/sh).
  • An additional 1M shares may be paid out in 2023, contingent on Tryke exceeding certain EBITDA targets for 2022.
  • Curaleaf said that the transaction is immediately accretive to EBITDA Margins and free cash flow generation.
  • Curaleaf gains six dispensaries: four in Las Vegas, Sparks, and Sun Valley, Nevada, and two in Phoenix, Arizona.
  • Tryke has a 30,000 sq ft cultivation facility that can expand to 80,000 sq ft.


The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

Launched in January 2015, and having analyzed more than $60B in deals, the Viridian Cannabis Deal Tracker is a proprietary data service that monitors and analyzes capital raise and M&A activity in the legal cannabis and CBD industries. Each week the Deal Tracker provides proprietary data and market intelligence on transactions, including:

  • Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors - from Cultivation to Brands to Software)
  • Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A)
  • Principals to the Transaction (Issuer/Investor/Lender/Acquirer)
  • Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)
  • Deals by Location of Issuer/Buyer/Seller ( To Track the Flow of Capital and M&A Deals by State and Country)
  • Credit Ratings (Leverage and Liquidity Ratios)

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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.

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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