The graph shows cannabis capital raises by country (chiefly USA & Canada) and by type (debt vs equity). The green bars depict equity capital raises, brown bars depict debt raises, and red bars depict all capital raises by companies headquartered outside of the U.S or Canada.
- The $4.3 billion of total capital raised in 2020 was down 63.5% from the $11.6 million raised in 2019, which was down 17.8% from $14.2 billion in 2018.
- The crash of cannabis equity prices and accompanying capital crunch began in the 2nd half of 2019 as investors became disillusioned by companies failing to meet overly optimistic projections. U.S. competitors were slower than expected in achieving breakeven EBITDA while most Canadian L.P’s continued to burn through prodigious amounts of cash.
- COVID-19 provided an extra dose of uncertainty. The legal cannabis industry had never been through a recession before, leading investors to continue to guard their wallets and companies to hold off on capital spending plans. Even after cannabis equity prices began to climb in the summer of 2020, capital raise activity continued to lag.
- The 2020 election produced the turnaround spark. Newly legalized states created capital needs to stand up grows and roll out dispensaries, and most importantly, the Senate flip provided the first real hope for federal legalization.
- The cannabis capital markets have responded vigorously. The $2.8 billion raised in the first 9 weeks of 2021 is 36% higher than the previous record for the period achieved in 2018. Viridian expects a continued broadening of issuance to a larger number of mid-sized issuers.
- U.S. – based companies have raised an increasing share of cannabis capital of 26%, 46%, 63%, and 67% in 2018, 2019, 2020, and the first 9 weeks of 2021 respectively.
- Debt peaked at 37% of capital raised in 2020, up from only 28% in 2019. It has subsequently fallen to only 3% of 2021 issuance as historically high valuation multiples have eliminated corporate dilution fears.
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.
The Viridian Cannabis Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis and hemp industry. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:
- Industry Sector (One of 12 sectors, from Cultivation to Brands)
- Dollar value of the transaction
- Region in which the deal occurred (Country or U.S. State)
- Status of the company announcing the transaction (Public vs. Private)
- Deal structure (Equity vs. Debt)
- Key deal terms (Pricing and Valuation)
Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.
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Lead image by Ilona Szentivanyi. Copyright: Benzinga.
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