OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS

Chart of the Week

Chart of the Week

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.

Week ended 05/31/2024

Viridian Capital Chart of the Week: Are U.S. Cultivation & Retail Capital Raises About to Swing Upward?

  • The Viridian Chart of the Week shows U.S. Cultivation & Retail sector capital raises, which are up 48% YTD from 2023, albeit from a historically low base. The increase contrasts with a 22.0% decline for all cannabis-related sectors worldwide and a 32.5% decline of all U.S. cannabis raises.
  • The green bars on the graph show equity raises and are coded so that the darker colors depict more significant issues. The dark green bar in 2021 shows the wave of large equity issues in which five of the ten most significant equity issues in cannabis history occurred. The dark orange and peach-colored bars show debt issues. The darker the bar, the larger the issue size.
  • Note that in 2023 and 2024, no debt or equity issues larger than $100M have occurred.
  • The licensed operators have been financed almost exclusively with debt since 2022, and midsized debt issues of $25M – $100M have accounted for more than half of all capital raised for the last two years.
  • The share of capital raised by public companies has declined from 85% in 2021 to approximately 45% in 2024, as the large MSOs have been largely absent from the market. Private companies have raised $106M of debt YTD in 2024, earmarking proceeds for expansions in Florida, Ohio, New Jersey, and New York.
  • Are capital raises about to accelerate based on rescheduling and other potential regulatory, legislative, or judicial events?
    • Equity issuance is frozen pending greater certainty on the timing of 280e relief but is likely to spike upward with any significant equity price recovery.
    • Significant debt maturities will need to be refinanced in late 2024 and through mid 2025.
    • New rec markets in Ohio, and potentially Pennsylvania and Florida, will require continuing capital investments and capital raises.
  • The successful implementation of rescheduling will be pivotal in dictating the terms that companies will face in the coming upswing in capital raises.