EXCLUSIVE: Viridian Capital's Scott Greiper On Increasing M&A In Cannabis Space, Trends, SPAC Opportunities

Lowered valuations for cannabis companies are leading to a shift in the way capital raises and merger and acquisition activity is occurring in the cannabis space. Viridian Capital Advisors President & Founder Scott Greiper shared the trends that are shifting in the space.

Early Capital In Cannabis: Viridian Capital was the first investment bank in the cannabis space in June 2014 at a time when six states were legalized.

“Around $400 million [was] raised that first year, [and] in the first nine months this year, $8.5 billion,” Greiper told attendees at the recent Benzinga Cannabis Capital Conference in New York City. 

Greiper discussed a decline in capital raises and mergers and acquisitions in the space with panelist Javier Hasse, the Managing Director of Benzinga Cannabis.

“Capital became scarce. Decline in public market valuations led to a decline in M&A.”

Related Link: 3 Cannabis SPACs To Consider For 2021

2021 Activity And Trends: Through the first nine months of 2021, there has been $8.5 billion in capital raised in the cannabis sector and $21.1 billion in mergers and acquisitions.

“It’s never been better,” Greiper said

Greiper said the trends have shifted to public companies buying public companies, something that wasn’t done in previous years.

“Public companies have to feed the beast.”

Six of the 10 largest M&A deals in 2021 were public companies buying public companies, Greiper told the Benzinga conference. 

In past years, when valuation declined for publicly traded companies, there was less activity because they couldn’t use an inflated stock price to acquire smaller companies, he said. 

“Usually you see a decline in valuation, decline in capital, decline in M&A; we haven’t seen that this year.”

Smaller $50-million and $100-million market capitalization companies are getting bought up, according to Greiper.

Another trend is new segments of the market like software companies getting bought up. In previous years, nine out of 10 deals were MSOs buying a private single state operator.

“That’s the metric we’ve seen for almost six years.”

Cannabis SPACs: Another topic discussed by Greiper and Hasse was the rise of SPACs targeting the cannabis space.

“SPAC buyers are very particular buyers,” Greiper said.

The interesting thing about the SPACs in the cannabis space is that they trade on the NYSE or Nasdaq and can’t acquire a plant-touching company due to listing restrictions.

Greiper said he was surprised to see Greenrose acquire cannabis companies and then downlist from the Nasdaq to the OTC.

Overall, SPACs in the cannabis space have helped open up opportunity for private companies to exit, he said. 

“It’s juiced the level of transactions in the sector.”