Capital Markets Continue to Shift and Develop in The Cannabis Space

Friends, once again, the capital markets continue to shift and develop in the cannabis space.  In other words, it’s a weekday.

 In the past two weeks, we’ve seen a major public company reduce and reprice their offering in response to market movements: https://mjbizdaily.com/marijuana-firm-medmen-scales-back-financing-appoints-interim-cfo/?utm_medium=email&utm_source=mjbiz_daily&utm_campaign=MJD_20181120_NEWS_Daily_11202018&elqTrackId=A25B5812550E3D302DAE5F24E8902F66&elq=caea0b4add5e4b3a8f21e560766efe39&elqaid=834&elqat=1&elqCampaignId=543

We’ve seen one of the larger institutional players announce the upcoming launch of a second fund at US$100 million: https://www.greenmarketreport.com/altitude-investment-closes-30-million-fund/

 We’ve seen a US$14 million PIPE deal by a cannabis-focused hedge fund: https://www.newcannabisventures.com/navy-capital-invests-14-7-million-in-marimed/

 

What does this mean, beyond the fact that I’m pretty good at cutting-and-pasting stories that are based on press releases?  It’s probably too early to call it a trend, since the cannabis markets seem to be evolving by the minute, but these deals appear to confirm what I heard in Vegas a few weeks ago: cash is king (or, as my former boss liked to say, “Liquidity is Value”).  As speculators finally start to recover from their collective hangover and share prices react to broader market trends, operating companies taking on investment are coming to prefer cash over stock. Investors are starting to fill that need for cash by raising bigger funds to write bigger checks (just like in the rest of the private equity world).  Just wait until someone figures out how to place real leverage into these deals…..

By: Marc Hauser