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Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis Industry November 7th, 2022 - November 11th, 2022


November 16, 2022 ( Newswire) KEY INSIGHTS & TAKEAWAYS


Transactional Activity:

Four capital raise transactions totaling $35.3M closed this week. One more transaction closed than last week, but volume was down by $43.2M. The same number of transactions closed as the previous year, but volume decreased by $157.6M. This week's average deal size was $8.8M compared to $46.2M last year.

Cannabis capital raises are off 64.2% YTD.

  • Total Equity issuance is off 74.4%, and total debt issuance is down 48.2%.
  • U.S. debt is down only 37.8%, while Canadian debt is down a more significant 79.4%.
  • At 56.5% of total capital raised, debt remains the highest in history for comparable periods.
  • Public companies accounted for 74.5% of total financing YTD, down from 79.8% in 2021.
  • The graph below shows that U.S. activity dominated capital raises for the first forty-five weeks of 2022, with 75.0% of all capital raised.
  • International capital raises of $319M represented 8.1% of total capital raises, exceeding the previous record of 6.4% in 2019.

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

  • Total capital raised is down 67.3%, but equity capital raised is down approximately 96.3%.
  • Debt financing is down 49.2% YTD but still accounts for about 95.6% of all capital raised; private companies raised 22.4% of it.
  • 76.7% of total capital raises YTD were completed by public companies compared to 85.1% in 2021.
  • In 2022, there have been no equity deals above $25M.


Cannabis stock prices (measured by the MSOS ETF) were up 6.60% last week, buoyed by better-than-expected results from Green Thumb (GTII: CSE) and news of the $185M purchase of Cresco (CL: CSE) and Columbia Care (CCHW: CSE) assets by Sean "Diddy" Combs.

We believe that the passage of SAFE+ in the lame-duck session is quite likely. SAFE+ will have potentially dramatic, though indirect, impacts on stock prices.

Meanwhile, negative industry trends, including wholesale price compression and an inflation-pressured consumer, continue to pressure financial results. We will closely monitor changes to analysts' 2023 outlooks over the next two weeks as third-quarter results continue to roll in. Investors should keep a close eye on cash levels as projected capital spending.

Since the end of the third quarter, the major MSOs have traded in a relatively tight band. After initial outperformance by GTI and Curaleaf and recent catch-up spurts by AYR and Ascend, the spread has been narrowing over the last month, and less than 25 points of performance separates the best from the worst. The market is back to trading mainly as a block, reacting primarily to snippets regarding SAFE.

Third-quarter earnings releases have been a mixed bag. Curaleaf (CURA: CSE), Green Thumb (GTII: CSE), Ascend (AAWH: OTC), and Schwazze (SHWZ: OTC) all had positive earnings surprises, while Trulieve (TRUL: CSE), Planet 13 (PLTH: CSE), MariMed (MRMD: CSE), Acreage (ACRDF: OTC), and Lowell Farms (LOWL: CSE) all disappointed. The chart below shows the revenue and EBITDA consensus estimates and actuals, ordered from the most significant EBITDA % misses to the most prominent EBITDA % beats.

YTD Returns by Public Company Category

Over the last month, U.S. Tier One companies have advanced four ranking positions due to solid performance from the largest names: Curaleaf (CURA: CSE). Green Thumb (GTII: CSE), and Trulieve (TRUL: CSE). The U.S Tier 3 category has underperformed as Parent Company (GRAMF: OTC). Tilt Holdings (TILT: CSE), Red White & Bloom (RWBYF: OTC), and StateHouse (STHZF: OTC) all suffered double-digit stock declines over the period.

Best and Worst Performers of the last week and YTD

Canopy Growth (WEED: TSX), Aurora (ACB: Nasdaq), and Sundial (SNDL: Nasdaq) were all among the top gainers this week on continued hope that the TSX gave Canopy's innovative legal maneuver to consolidate earnings of its U.S. properties positive mention. Nasdaq has yet to issue a definitive ruling on the action.

California companies Unrivaled Brands (UNRV: OTC), Stem Holdings (STMH: OTC), Vibe Growth (VIBE: CSE), and Lowell Farms (LOWL: CSE) repeated their last week's positioning among the biggest losers, all down in the 12%-14% range.


The Week's Largest Closed Equity Transaction:

On November 8, 2022, Sensorium Therapeutics (Private), a biotechnology company leveraging medicinal chemistry, neuroscience, and machine learning to develop psychoactive medicines, closed a Series A Funding round for $30M.

  • Sante Ventures, Route 66 Ventures, and CU Healthcare Innovation Fund led the round with participation by WPSS Bio, Palo Santo, Iter Investments, Ocama Partners, and re Mind Capital.
  • Psychedelic companies are seeing an influx of equity capital.

Public Company Raises:

Three of the four companies that raised capital this week were public. All three trade in Canada (one on the TSX and two on CSE) and in the U.S. (on OTC).

Equity vs. Debt Cap Raises:

Equity accounted for 86.3% of this week's capital raises.


Debt accounted for 79% of trailing 4-week capital raises. We expect this ratio to be volatile because of the limited capital raise activity but average above 50%. Several large MSOs, including TerrAscend (TER: CSE), Jushi (JUSH: CSE), and AYR (AYR.A: CSE), have significant refinancings to do based on their debt maturity schedules. Several smaller tier 2 and tier 3 companies have upcoming financing needs that we believe will spur an increase in debt financing

The Week's Largest Debt Raise:

On November 7, 2022, Vext Science (VEXT: CSE)(VEXTF: OTC) announced the closing of a $4.6M refinancing of Secured Convertible Debentures that were maturing in December 2022.

  • The new non-convertible debentures have an 11.25% interest rate and will mature in December 2027.
  • The debt is secured by substantially all business assets in Arizona or Ohio subject to a first-priority claim by the company's senior secured lenders.
  • Warrants for 365,909 shares with a $.38 exercise price (3% warrant coverage and 81% exercise premium) add only 2bp to the effective cost of 11.27%, primarily due to the low coverage.
  • The table below shows that the Viridian Credit Tracker model ranks Vext as the best credit among our database's 16 U.S. Cultivation and Retail credits, with market caps between $10M and $100M. Despite its high credit quality, the pricing at 11.25% strikes us as aggressive in the current market especially considering recent executions by Verano and TerrAscend.


Transactional Activity:

Six M&A transactions closed this week for disclosed consideration of $3.8M compared to five transactions for $168.7M in the prior year.

Total YTD M&A volume is down 80.2% from 2021, with $4.80B in consideration and 163 deals closed versus $24.19B in transaction value and 286 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 61.1% YTD.

We believe the likelihood of relatively sizeable public/public M&A transactions has increased significantly based on the low trading multiples of tier 2 and 3 MSOs and SSOs, particularly those perceived to be cash flow pressured.

U.S. volume is down 67.8% YTD, with 32.7% fewer transactions.

The average transaction size of $30.7M is down 52.1% from 2021. Growth in transaction size will probably not be seen until early 2023 at the earliest as significant transactions have either been shelved (Verano/ Goodness Growth) or delayed into 2023 (Cresco/ Columbia).

Major Pending Deals Risk Arb

The Cresco/Columbia deal spread widened by 100 bp to 12.1% on 11/11/22. We are surprised that last week's announcement that Sean "Diddy" Combes was acquiring assets from Cresco and Columbia for $185M, bringing the transaction closer to completion, didn't have more of a positive impact. Management is now guiding towards a Q1 2023 closing.

Valuation Gap

The valuation gap widened to 4.35 on 11/11/22, the highest since the first quarter's end. 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 Most Interesting M&A Deal of the Week:

On November 9, 2022, PureCann Pharma Inc. (Private) announced that it had closed its acquisition of the cannabis assets of Neptune Wellness Solutions (NEPT: Nasdaq).

  • The consideration of $3.84M was paid in cash.
  • The assets include the cannabis plant in Sherbrooke, Quebec, the Mood Ring, PanHash Brands, and related assets.


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)

*Copyright © 2021 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.

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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