Marijuana Business Factbook 2019

282 Marijuana Business Factbook 2019 Chapter 7 | Cannabis Business Funding & Investing © Copyright 2020, Marijuana Business Daily , a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call (720) 213-5992, ext. 1. Big Tobacco’s first major investment in cannabis was Altria Group’s $1.8 billion investment in Ontario-based Cronos Group in December 2018. Altria ― owner of Marlboro cigarette manufacturer Philip Morris USA and an investor in alcohol powerhouse Anheuser-Busch InBev ― took a 45% ownership interest in Cronos, with ownership potential of 55% if Altria exercises all available warrants. Cronos intends to use the additional financial resources to expand its domestic footprint and grow its global holdings. Stateside, Pax Labs completed a record-breaking fundraise for U.S. firms in April 2019, raising $420 million in equity financing from both new and existing institutional investors. Pax ― a vaporizer manufacturer that spun off from e-cigarette producer Juul ― intends to use the funds to invest in new products, new domestic and international markets and hemp-based CBD extracts. The company initially sought to raise only $150 million, but surging interest from investors boosted the raise well beyond that figure, a signal of both mainstream interest in the cannabis space as well as a reflection of growing consumer demand for vape products. CHART 7.08: Types Of Investments Made By Cannabis Industry Investors: 2017 Compared With 2019 Note: Multiple-choice question; respondent total may be greater than 100%. Source: 2019 Marijuana Business Factbook © 2019 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved. Types Of Investments Made By Cannabis Industry Investors: 2017 Compared To 2019 Equity Investments Interest-Bearing Loans Other Private Equity/Managed Fund Public Stock Purchases Purchase Company, Actively Manage Operations 61% 78% 37% 22% 5% 7% 18% 26% 52% 48% 12% 15% Percent Of Investors 2017 2019 As the cannabis industry develops, the types of investments being made are changing. One notable shift is a move away from loan financing toward equity investment. As the perceived risk of investing in the cannabis industry recedes, investors are seeing the upside of equity investment and have less interest in making loans. While a loan guarantees a given rate of return over a set period of time, equity has the potential to provide even greater returns, albeit with a greater level of risk. However, this shift away from debt to equity financing is perceived by analysts as a signal of the long-term sustainability of the industry. There has also been an increase in the number of opportunities to invest in private equity and managed funds. High-net-worth individuals and family offices have shown interest in the cannabis space and a preference for placing funds into these investment vehicles rather than in individual companies.