Week of 10/31/22-11/4/22 - Viridian Capital Advisors

Capital Raises

Home » Week of 10/31/22-11/4/22

Cannabis capital raises are off 63.9% YTD:

Total Equity issuance is off 74.7%, and total debt issuance is down 46.4%.
U.S. debt is down only 34.5%, while Canadian debt is down a more significant 79.4%.
At 56.9% of total capital raised, debt remains the highest in history for comparable periods.
Public companies accounted for 73.6% of total financing YTD, down from 78.9% in 2021.
The graph below shows that U.S. activity dominated capital raises for the first forty-four weeks of 2022, with 74.8% 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.

- 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 except for AYR (AYR.A: CSE) and Jushi (JUSHF: OTC), which have each gained over 45%. Interestingly, the market seems to have shrugged off concerns of relatively high leverage and upcoming debt maturities and focused on the low trading multiples of these two companies.

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

Total capital raised is down 61.8%, but equity capital raised is down approximately 96.3%.
Debt financing is down 23.4% YTD but still accounts for about 94.9% of all capital raised; private companies raised 24.9% of it.
72.9% of total capital raises YTD were completed by public companies compared to 79.8% in 2021.
In 2022, there have been no equity deals above $25M.

YTD Returns by Public Company Category

What a difference a week can make! U.S. tier-one MSOs lost four places in our ranking of YTD stock performance in a dramatic demonstration that liquidity can cut both ways. U.S. Biotech and Psychedelics were two of the gainers.

The market is still strongly differentiating between MSOs, and the gap in the last twelve-week stock performance between the best performer (GTI (GTII: CSE) up 26.9%) and the worst (4Front (FFNT: CSE) down 32.2%) has widened to 68 points. But since August, it’s been Green Thumb and everyone else. GTI has been the lone gainer over the last three months.

Best and Worst Performers of the last week and YTD

Jushi (JUSHF: OTC) was the week’s best performer, up 18.95%. We did not see any specific news to account for the gain.

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