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

Capital Raises

Past Charts

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 04/01/2022

  • Transactional ActivityThere were two more transactions but a $51.3 million lower volume than the prior week. Compared to last year’s same week, eleven fewer transactions closed with a $57.3 million lower volume. The average deal size was $1.4 million this week vs. $4.2 million in the same week last year.
  • The cannabis equity markets rallied past disappointing earnings, ongoing supply chain disruptions, rampaging inflation, an increasingly brutal war in Ukraine, new COVID lockdowns, and…. So what, one might ask, was the good news? We can only point to two things: the MORE Act passing the House again and the M&A market seemingly indicating that practically everyone is a takeout candidate.
  • Concerning the legislative front, be prepared to be disappointed again. We keep hearing the old WHO song “won’t get fooled again.” Let’s be clear, we believe the likelihood of any substantive bill passing this year is very low, and the only thing that has even a fair chance is some slightly social equity augmented version of the Safe Act. Unfortunately, once MORE fails in the Senate and the  Schumer//Booker circus leaves town, we are afraid that the downward drift in cannabis is likely to return.
  • Continued consolidation activity is a better bet to support the market. We were gratified to see that the 2nd tier competitors we have advocated have outperformed their larger brethren YTD. And part of that relates to the fact that many of them are poised to be acquired. Our valuation gap graph presented in the M&A section supports the idea that accretive financial M&A is also on the docket.
  • This quarter, earnings comps were bound to be challenging since we were comping against a stay home and spending your incentive check on the cannabis environment. Second-quarter comps should be better, potentially buoying the market, but those releases are months away.   Meantime, batten the hatches; it could be a bit scary out there.
  • One of the most significant risk-off indicators, an inverted yield curve, is flashing red for the first time in years. The two-ten spread inverted on April fools day, and it is a reasonably good indicator of the year ahead recession risk. So there you have it:  war, inflation, recession, & pestilence. Oh My!

  • Off 74% YTD, cannabis capital raise activity was the slowest 1st quarter since 2017. Reduced equity issuance (down 86% y/o/y in the U.S. and 97% in Canada) was partially compensated for in the U.S. by solid debt issuance (up 392% y/o/y, however, Canada’s debt decline of 93% brought total debt issuance down as well. As the graph below shows, capital raises for the first twelve weeks of 2022 were dominated by U.S. activity. Additionally, a higher percentage of capital raises came from international locations than in any recent year’s first quarter.

  • There were only four closed capital raises for $5.4M this week, the eighth slowest week since 2019. The graph below clearly shows the sea change in financing as debt (light green) replaced equity (dark green) as the market slid.

  • Debt seems likely to remain the financing vehicle of choice. Still, we are interested to see if floating rates and shorter durations become more common as investors have an apparent reason to fear increasing rates.

                                                                                                  

  • Cap Raises by Sector:
          

Market Commentary and Outlook

This Week Sector Focus

Capital Raises vs Stock Prices

Best and Worst Stock Performers