Cannabis 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.

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 provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

• Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors - from Cultivation to Brands to Software)

• Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)

• Principals to the Transaction (Issuer/Investor/Lender/Acquirer) Key deal terms (Pricing and Valuation)

• Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)

• Deals by Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)

• Credit Ratings (Leverage and Liquidity Ratios)

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.