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Cannabis Deal Tracker: Investment and M&A Activity in the Cannabis, CBD and Psychedelics Industry December 26th, 2022 - December 30th, 2022


January 4, 2023 ( Newswire) KEY INSIGHTS & TAKEAWAYS


Transactional Activity:

One capital raise transaction totaling $1.0M closed this week. Eight fewer transactions closed than last week, and the volume was down by $156.3M. Two fewer transactions closed than the previous year, and volume decreased by $38.1M. This week's average deal size was $1.0M compared to $13.0M last year.

Cannabis capital raises for 2022 were down 65.6% from 2021.

  • Total Equity issuance is off 75.0%, and total debt issuance is down 53.1%.
  • U.S. debt is down only 47.4%, while Canadian debt is down a more significant 76.4%.
  • At 58.7% of total capital raised, debt remains the highest in history for comparable periods.
  • Public companies accounted for 75.4% of total financing in 2022, down from 80.8% in 2021.
  • The graph below shows that U.S. activity dominated capital raise in 2022, with 74.7% of all capital raised.
  • International capital raises of $319.8M represented 7.4% of total capital raises, exceeding the previous record of 6.4% in 2019.

The U.S. Cultivation & Retail sector capital raises are down 71.6% YTD, but equity capital raised is down approximately 96.3%.

  • Debt financing is down 50.6% YTD but accounts for about 94.0% of all capital raised; private companies raised 8.7% of it.
  • 89.3% of total capital raises YTD were completed by public companies compared to 88.4% in 2021.
  • In 2022, there have been no equity deals above $25M.


The U.S. Cultivation & Retail sector capital raises are down 71.6% YTD, but equity capital raised is down approximately 96.3%.

  • Debt financing is down 50.6% YTD but accounts for about 94.0% of all capital raised; private companies raised 8.7% of it.
  • 89.3% of total capital raises YTD were completed by public companies compared to 88.4% in 2021.
  • In 2022, there have been no equity deals above $25M.

YTD Returns by Public Company Category

Tier 3s, the category that stood most to gain from SAFE, lost another notch of ranking in terms of YTD returns. Investors are rightfully concerned about the liquidity of smaller companies in the No SAFE capital crunch environment. Ironically, the large Canadian LPs, with among the most disastrous financial statements of all the categories in the graph, outperformed in 2022. For obvious reasons, the best performer was Cronos (CRON: Nasdaq): 91.2% of the company's market cap is its cash hoard of nearly $900M. We have been critical along the way, but in retrospect, cash has been a better investment than cannabis operations by a wide margin.

Best and Worst Performers of the last week and YTD

Nova Cannabis (NOVC: CSE) continued to rally on the news of its joint venture with Sundial. Vext (VEXT: CSE) repeated its showing on the winner's list for what we ascribe to either M&A speculation or the realization that some of the smaller players will be sustainable even in the no SAFE environment.

Top losers included California heavy operators MedMen (MMEN: CSE). Glass House (GLASF: OTC), TPCO (GRAMF: OTC), and Unrivaled Brands (UNRV: OTC). The realization is that no legislative action will be forthcoming to rescue the disastrous California cannabis economics. We view Glass House as the best hedge against interstate commerce, but this is not a risk at the top of most investors' minds.


The Week's Largest Closed Equity Transaction:

On December 29, 2022, Halo Collective Inc. (HCANF: OTC), a cultivator, extractor, and producer of cannabis-infused edibles and beverages in California and Oregon, closed the second and final tranche of $1M to conclude the $7M financing round, initially announced in July 2022.

Public Company Raises:

The only company that raised capital this week is public and trades in Canada on the NEO and the U.S. on OTC.

Equity vs. Debt Cap Raises:

Equity accounted for 100% of this week's capital raises.


Debt accounted for 82% of trailing 4-week capital raises. We expect this ratio to be volatile because of the limited capital raise activity. Still, we expect it to average well over 50%, especially since many companies are trading at or close to their 52-week lows.

The Week's Largest Debt Raise:

There were no closed debt raises this week.


Transactional Activity:

One M&A transaction closed this week for $11.0M, compared to three transactions for $179.0M in the prior year.

Total YTD M&A volume is down 80.4% from 2021, with $4.95B in consideration and 176 deals closed versus $25.2B in transaction value and 319 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 64.4% 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 69.1% YTD, with 49.5% fewer transactions.

The average transaction size of $29.1M was down 38.9% from 2021. Growth in transaction size will probably not be seen until the end of the first quarter of 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 520bp to 39.5% on 12/23/22. This spread signals considerable market doubt about closing this transaction despite both companies continuing to say that they are committed to the deal. The Diddy deal closing is perhaps the most significant concern as it promises to fund $180M of cash for debt paydown post-closing. The transaction was inked before NY released its rules which say that ROs can only have three adult dispensaries (Diddy would have 4) and that they can only be medical for three years after the first adult sales in the market. Is it possible that the deal could break over this? The crash of equity prices has also reduced the likely proceeds from other planned asset sales in Ohio, Maryland, and Florida. The net result is a combined company with more debt than initially planned at refinancing rates that continue to climb. Still, the deal has gone a long way down the tracks towards closing, and an unannualized rate of return of 40% for a 3-month investment seems like an attractive speculation. Is it too good to be true?

Valuation Gap

The valuation gap widened slightly to 2.06 on 12/23/22, close to its lowest value since we began tracking this measure and 154 bps lower than its 52-week 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 to the greater trading liquidity of the larger companies.

The gap has plunged primarily because the Tier one stocks are significantly more liquid and have accordingly traded down more sharply. In a chaotic market, the small company trading multiples may not be a good guide to the prices at which these companies would sell in an M&A setting.

The failure of the SAFE act is more detrimental to the smaller companies, and we would expect the gap to widen as the valuation of the less liquid tiers normalizes.

The Only M&A Deal of the Week:

On December 27, 2022, Flora Growth Corp. (FLGC: Nasdaq), a leading all-outdoor cultivator, manufacturer, and distributor of global cannabis products, announced the closing of its acquisition of all outstanding shares of Franchise Global Health (FGH: TSX), a multinational operator in medical cannabis with principal operations in Germany.

  • The $11.0M consideration was paid through the issuance of 43.5M common shares of Flora.
  • The consideration represents a .25x multiple of FGH's annualized 9-month revenues.
  • The deal establishes a foothold for the distribution of wholesale cannabis products in Europe.
  • FGH, through a subsidiary, holds the first German medical cannabis import and distribution license, granted in 2017.


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.

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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.

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