Cannabis Industry Chart Of The Week: Private Equity A Smaller % Of Equity Raises Despite Bigger Deal Sizes

The graph shows total equity capital raised by private companies (green bar) as a % of total equity raises during the first 20 weeks of each year. The orange line shows the average private equity deal size.

• Private companies account for less than 1/2 as much of dollars raised YTD in 2021 than they did in the same period in 2018. The credit crunch that began in the last half of 2019 has substantially eased, however the effects are still being felt in the finances of private cannabis companies, who continue to face tougher market conditions.

• The large institutional capital investors that  have entered the cannabis market in the last year have invested in the largest and most liquid public equities.

• Valuation multiples for large public cannabis companies reached historic levels in early 2021, spurring a record wave of issuances. Much of this cash was earmarked for acquisitions and remains on the MSO’s balance sheets.

• We have previously commented on the significantly lower valuation multiples achieved by smaller public cannabis companies compared to their larger competitors and this discount has been even larger for private companies.

• Investors should increase their allocation to private cannabis companies with strong market positions and prospects for profitability to take advantage of the favorable valuation and the possibility of an M&A takeout. 

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 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.

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

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