January was a great month for the cannabis industry, despite Attorney General Jeff Sessions’ decision to rescind the Cole Memo, an Obama-era memorandum that essentially protected state-legal cannabis businesses from federal prosecution. Marijuana companies received more than $1.2 billion in investments over the first five weeks of the year, matching deals for all of 2016.
February wasn’t as hot, with both the cannabis sector and the overall market performing poorly, but investors continued to pour money into marijuana companies at an accelerated pace. According to the Viridian Cannabis Deal Tracker, a unique database that tracks capital raises and M&A activity in the cannabis industry, deals for February surpassed $720 million.
This means that, in just 60 days, the cannabis industry has seen almost $2 billion in new funds. This figure is more than four times the $456.6 million in raises from the first nine weeks of 2017.
Aggregate Data
Over the first nine weeks of the year:
- The cannabis industry saw 126 capital raises, more than double from the same period last year;
- At least a dozen of these raises brought $50 million or more;
- Eighty-five percent of these raises used equity structures, up from 72.9 percent last year;
- The average raise size was $15.5 million, compared to $6.2 million in the first nine weeks of 2017;
- Sixty-nine percent of the raises were conducted by publicly traded companies, up from 67.5 percent last year;
- 78.4 percent of the total dollars raised went to public companies, up from 77.1 percent last year;
- Private companies still received (ironically) $420 million, more than three times what they got in the first nine weeks of last year; and
- Most of the investments (almost $1.2 billion) went to cultivation and retail companies.
“This year we saw several larger debt raises,” Viridian Capital Advisors’ Vice President Harrison Phillips told Benzinga. “Some of these were convertible debt, but we also saw a private debt financing and a streaming financing to help build out facilities.”
Largest Capital Raises
The largest, single capital raises for the month of February, as measured in U.S. dollars:
- Canopy Growth Corp TWMJF 4.55%: $159.6 million
- Newstrike Resources Ltd NWKRF 2.07%: $63.7 million
- MTech Acquisition Corp MTECU 0.12% (NASDAQ:MTEC): $50 million
- Tilray: $47.6 million
- Captor Capital Corp NWURF 3.23%: $44.2 million
The cultivation and retail sub-segment of the cannabis industry continued to attract the most money, although investments and M&A firms also got a decent amount of cash (more than $400 million).
“Some of these investments and M&A firms, especially those up in Canada, are really being run as publicly-traded holding companies Their strategy consists of raising capital into the company and then re-deploying that into strategic investments,” Phillips said.
Interesting Trends
Some other interesting trends seen in the cannabis industry:
- Companies uplisting to higher-level stock exchanges. Most recently, Cronos Group Inc. CRON 6.12% started trading on the Nasdaq.
- An increased interest to make strategic investments in Jamaica, as evidenced by Hiku Brands Company Ltd DJACF 6.46%’s acquisition of Kaya Inc.
- Continued consolidation of Canadian licensed producers as they seek to achieve the economies of scale needed to remain competitive.
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