Canadian marijuana companies raise record cash ahead of legalization

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Canada cannabis capital raises, Canadian marijuana companies raise record cash ahead of legalization

Canada-based cannabis companies raised more than 3 billion Canadian dollars ($2.2 billion) in the first half of 2018 – a record amount – as the industry scales to meet expected exceptional demand when recreational sales kick off in October.

The total represents a mammoth 1,200% increase over the same period in 2017, when CA$222 million in equity and debt was raised, according to New York-based Viridian Capital Advisors.

Canada’s capital-hungry marijuana companies are increasingly turning to debt to fuel growth.

Access to debt rose from CA$30.8 million in the first half of 2017 to CA$658.2 million in the same period of 2018. (That does not include a CA$200 million loan by Alberta-based Aurora Cannabis last month.)

The average equity raise doubled from CA$10 million in the first six months of 2017 to CA$20.6 million one year later.

The number of equity financings rose from 19 in the first half of 2017 to 118 a year later, while the number of debt financings doubled from 10 to 22.

“There are still investors who believe that virtually any cannabis investment is a good one at this stage, given the nascent stage of the industry – that one can’t lose when it comes to cannabis,” said Louis Barré, president of Ottawa-based Cannab Intel, a cannabis consultancy.

He warned that other investors are much more cautious, recognizing that it already may be too late in certain parts of the sector and there’s a need to be highly selective and strategic.

“Not all companies will be winners as the industry matures and consolidates,” he said.

Matt Lamers can be reached at mattl@mjbizdaily.com

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