EXCLUSIVE: Tracking Every Cannabis Deal Is 'A Lot Of Fun,' Says Financial Expert Behind Essential Investor Tool

For the first time in three years, capital raises in the cannabis sector increased, according to Frank Colombo, managing director of data analytics and investment banking at Viridian Capital Advisors.

Colombo provided an overview of capital raising trends in the space on Tuesday at the Benzinga Cannabis Capital Conference. He told the crowd gathered in Chicago there's been an increase of 14.8% in capital raises in 2024, driven mostly by Canadian equities and U.S. debt.

Colombo said U.S. debt accounts for over 50% of capital raises, indicating a reliance on debt financing rather than equity in the market. Out of all sectors, retail and cultivation sectors are responsible for half of all capital raises. However, out of 12 different sectors, "investments in M&A” were "really up," he said.

Colombo, along with Scott Greiper, founder and president of Viridian Capital Advisors, gave a presentation discussing the core principles of equity research and investment strategies tailored for the cannabis sector.

Colombo said the U.S. cultivation and retail sectors saw a significant 226% increase in capital raises year-to-date, primarily driven by debt refinancing rather than new capital influx. "Out of the $830 million of new debt, it’s only been like $120 of new money," he said, adding that many cannabis multi-state operators (MSOs) are overleveraged.

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Credit Analysis Is Of Utmost Importance

Colombo also emphasized the importance of nuanced credit analysis, recommending a laddered approach to equity investment that avoids high-risk entities while targeting those with strong credit ratings and growth potential. "You should, really, stick primarily to a company that we rate as the better credits, the top 10 out of the 30 we rate every week," Colombo said, referring to Viridian's analyses.

"For the near term, we think that the most appropriate equity stance to be in is don’t step in the proverbial dog s**t," Colombo said. "Credit problems have been a big part of the equity, downturn" for a lot of cannabis operators, "so you just need to avoid disasters, and if you can do that, you’re going to get the rising of all boats."

Lastly, he said market catalysts in 2025 such as potential cannabis rescheduling and banking reform, could allow companies to improve their financial positions and attract new investments. "Pay close attention to credit analysis… As these catalysts start to happen."

That said, Greiper explained that Viridian provides insights into where capital is flowing, the types of investors involved, and how valuations are determined.

"We’re nine and a half years into this,” Greiper said. "We’ve covered about 75 billion dollars in deals and about 6500 transactions."

After joining the firm four years ago, Colombo took Viridian's work to the next level. The company continually evolves its data offerings, including a subscription model allowing historical trend analysis and deeper insights into market activity.

"We put out our market reports every day," Greiper said. “We’ve invested in our people, we’ve invested in our analysts because tracking every deal in the cannabis industry globally is really a lot of fun.”

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Frank Colombo, of Viridian Capital Advisors, speaks at the Benzinga Cannabis Capital Conference on Tuesday. Photo by Wendy Davis.