Chicago-based marijuana firm Cresco Labs closed a $100 million funding round that attracted institutional investors, a notable milestone for cannabis finance in the United States.
The raise represents the second-largest deal inked in the U.S. marijuana industry to date.
New York-based Acreage Holdings’ $119 million raise in July holds the top spot for private funding deals. Unlike Cresco, that deal relied on money from high-net-worth individuals and family offices from around the globe.
Cresco plans to use the capital to grow its footprint in the six states in which it already operates and target new states to expand to, Cresco Labs CEO Charlie Bachtell said. The vertically integrated, plant-touching company also plans to go public in Canada.
“We are regulation people and our primary focus of any expansion efforts are identifying programs in states with highly regulated markets and regulatory frameworks that we want to be a part of,” Bachtell said.
A “vast majority” of the raise included investments from Canadian, European and U.S. institutional investors – including investment banks – and capital funds set up for cannabis, Bachtell said, without going into detail.
“This was new for us – the addition of institutional investors,” he said, adding that the firm’s previous funding rounds – which totaled $85 million – included investments “primarily from friends and family, high-net-worth investors and family offices.”
Both the size of Cresco Labs’ latest raise and the investor base “is part of a trend that’s going to continue to pick up steam,” said Andrew Kessner, an analyst with New York-based investment advising firm William O’Neil.
“As more U.S. operators turn to Canada to raise money, you’re certainly seeing money coming in from more institutional investors,” he said.
“Investors are eager to get in on a private investment right before (a firm) goes public in Canada because they can see what has happened with the U.S. operators that have already done so.”
Cresco Labs is pursuing a reverse takeover (RTO) of a firm already listed on the Canadian Securities Exchange. The maneuver has become a go-to method among U.S. cannabis firms looking to go public in Canada.
Bachtell said he could not share additional details about Cresco’s plans, other than he expects the RTO and public listing to take place this quarter.
Green Thumb Industries (CSE: GTII and OTCMKTS: GTBIF) is now trading at a valuation of nearly $3 billion Canadian dollars ($2.3 billion) since going public in Canada in June. Green Thumb’s stock on Thursday was trading at CA$20.43 – more than double the company’s trading debut of CA$8.95.
“Many U.S. operators are still relatively under the radar compared to their Canadian peers, but as more firms goes public, I think it will generally bring a lot more attention to the U.S. companies,” Kessner said.
Cresco first began considering going public in Canadian nearly a year ago.
“So much has changed in the industry since then,” he said. “The maturation of the industry and the acceptance of the investment community – especially for multistate operators – have developed and evolved significantly in the last 12 to 15 months.”
Launched three years ago in Illinois, Cresco Labs also has operations in Arizona, California, Nevada, Ohio and Pennsylvania.
Lisa Bernard-Kuhn can be reached at [email protected]