OUR 8TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / CBD / PSYCHEDELIC SECTORS

Capital Raises

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Capital Raises

Capital Raises Summary

Each week, Viridian publishes insights and analysis on completed capital raise transactions in the prior week, focusing on all equity and debt deals. Our analysis includes:

  • YTD Analysis
  • Sector Focus
  • Capital Raises vs Equity Prices
  • Outlook
  • Sector and Company Performance
  • Capital Raises by Sector

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YTD Analysis

Week ended 03/11/2022

 

  • Transactional ActivityThere were four fewer transactions and an $81.5 million lower volume this week than the prior week. Compared to last year’s same week, eleven fewer transactions closed with a $542.5 million lower volume. The average deal size was $9.4 million this week vs. $40.8 million in the same week last year.
  • The war in Ukraine, inflation/interest rate worries, and the virtual free fall of cannabis equities, have brought cannabis equity raises to a standstill. The $.35M in equity issues this week was significantly below the $38M average YTD, sharply down from the $298M weekly average registered for this time last year.
  • Total capital raises for the first nine weeks of 2022 total $732M, down 78% from last year’s figure of $3.3B. Reduced equity issuance (down 86% y/o/y in the U.S. and 97% in Canada) was partially compensated for by solid debt issuance (up 313% y/o/y in the U.S. but down 97% in Canada. As the graph below shows, capital raises for the first ten weeks of 2022 were dominated by U.S. activity. The $54M raised by European companies YTD is the highest international raise since 2019.

 

    • Speculation: The economic calculus is becoming ever more complicated as COVID has reared its ugly head again, just to make things more interesting. This week, China shut down several key manufacturing cities due to renewed COVID outbreaks. Hong Kong has been faring poorly for weeks on the same front. And Germany has announced an upswing in cases.
    • The combined effects of renewed COVID, sharply higher inflation, worsened supply shocks, and war are mind-boggling and may have counterintuitive impacts on markets and cannabis.
    • The market rallied today perversely. The convoluted reasoning went something like this. Chinese shutdowns and induced greater supply shocks will slow the Chinese and world economies to the point that the energy crises may not be as bad as we thought. So oil prices dropped, and the markets rallied. Got it?
    • We remain convinced that the FED will eventually have to bite the bullet and slam harder on the breaks lest it allows accelerating inflation. And history is pretty clear that the recession risks go up markedly when that happens.
    • Will that help or hurt cannabis consumption? We haven’t had a fair test yet. Last time around, job losses and economic weakness were buffered by trillions of stimulus spending, and we don’t think there’s money in the coffers for another round of that. So which will win out, the need to tighten our belts or relieve our stress?
    • Meanwhile, we keep coming back to the stocks being stupidly cheap but getting cheaper. And the one thing that scares us is the line attributed to Keynes, “the market can stay irrational longer than you can stay solvent.” Still, it’s hard to imagine a better opportunity for those who can think long-term.
    • We don’t see Washington getting its act together before the midterms, so we are looking for the impact of state openings like New Jersey to keep pumping the cannabis cash registers until it’s just impossible to ignore. A few major consolidating M&A deals may help as well. Let us know what you think.
    • Cap Raises by Sector:

              

    • Public Company Listings: Only one of the three companies that raised capital this week was public. The company Pure Extracts trades on the CSE and the OTC.
    • Equity vs. Debt Cap Raises: Equity accounted for one of the three capital raises and 1.2% of the proceeds.

Market Commentary and Outlook

This Week Sector Focus

Capital Raises vs Stock Prices

Best and Worst Stock Performers