Viridian Chart Of The Week: Have We Seen The Bottom For Hemp?

• Hemp capital market deals punished in 2020: 

  • Hemp capital raise transactions are down significantly in 2020 both in terms of aggregate dollars raised and in number of transactions. A similar picture is seen when we look at the number of acquisitions targeting hemp and when we look at hemp as a % of total cannabis capital market activity.

• What went wrong:

  • Farmers over planted in search of a new cash crop.

  • Major processors fostered this excess cultivation in anticipation of the entrance of large CPG companies into the CBD market. Delays in FDA regulation kept this new source of demand from materializing.

  • Lack of adequate processing capacity left large amounts of crops to rot in the fields.

  • Brands proliferated, pricing crashed, defaults/bankruptcies ensued and investors backed away.

• Why do we expect the situation to improve?

  • Cultivation has been rationalized.

  • The new administration is expected to push for FDA action.

  • Base CBD demand continues to grow rapidly.

  • Industrial hemp applications are accelerating.

  • Hemp focused SPACs (including recently filed $100M Ackrell Capital and $150M Collective Growth) will add fresh capital and management oversight to the industry over the next 18 months.

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 analyzed 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)

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. 

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.

Photo by Javier Hasse.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.