Debt dominates cannabis capital raises as equity deals dry up

Once a beacon of rapid growth and awash in investment, the cannabis industry is now struggling with a persistent need for capital.

It’s good news for certain lenders, but for small to midsize operators seeking to raise cash to stay afloat or enter new or expanding markets like New York and Ohio, the answer is increasingly debt.

After peaking in 2021 with multiple $500 million-plus investment rounds, the industry has transitioned from a high-growth phase to a more commoditized market characterized by price declines and minimal organic growth, said Scott Greiper, founder and CEO of New York-based investment banking and data firm Viridian Capital Advisors.

“When companies don’t have organic growth, they acquire growth,” he said.

The trend has been evident among multistate operators, which have long relied on M&A as a primary strategy to expand their footprints. As new licenses become increasingly scarce, MSOs are doubling down on acquisitions to offset slowing organic growth.

The shift demonstrates the evolving dynamics of the cannabis industry, where regulatory constraints and market saturation are pushing operators to consolidate rather than grow organically. As competition intensifies and opportunities for new market entries dwindle, strategic acquisitions have become critical to maintaining growth and market share.

Can debt financing save the industry?

Debt financing is a lifeline for the $32 billion legal cannabis industry, accounting for about 94.8% of all capital raised by U.S. licensed operators in 2025, according to the Viridian Cannabis Deal Tracker.

While large MSOs have the most success, smaller and mid-sized operators often struggle to secure funding.

The majority of recent debt financing has been aimed at refinancing existing loans, rather than funding new growth.

The “amend and extend” strategy has become increasingly common as companies facing maturing debt renegotiate terms rather than default, Greiper said.

Of the top 10 capital raises in 2025 nine were debt financing, with only ATAI Life Sciences doing an equity deal at $150 million.

The debt raises included:

• Cresco Labs, $325 million
• The Cannabist Co. Holdings, $270 million
• Vireo Growth Inc., $120 million
• Trulieve Cannabis, $100 million
• Chicago Atlantic BDC, $100 million
• TerrAscend Corp., $79 million
• Glass House Brands, $77.5 million
• Curaleaf Holdings, $60 million

Curaleaf and Jushi are the only significant refinancings left to be completed in 2026, according to the report.

In some cases, lenders have found creative solutions like Article 9 foreclosures, which allow companies to continue core operations while finding buyers to pay off their notes. Last April, California operator Gold Flora announced it would liquidate its assets after mounting financial losses and operational challenges, and MSO Ayr Wellness said last July that it would sell off its assets.

“If you’re a lender and your client is not producing enough cash flow to service or pay off the note, you have two options: You can foreclose on the debt and take over the company – they don’t want the company – or you can find a buyer to buy your company and pay off your note,” Greiper said.

“That’s becoming more common now. There is no bankruptcy route, so you have to be kind of creative.”

Despite these efforts, the cost of debt has risen significantly.

Larger private MSOs can secure financing at rates of 9% to 11%, while smaller private operators face rates as high as 23%.

The disparity demonstrates the growing divide between well-capitalized industry leaders and smaller players struggling to stay afloat.

What is the path forward amid regulatory uncertainty?

Most of the cannabis industry’s growth remains reliant on regulatory reform, a precarious position for any sector, although Vireo appears to be an exception after an aggressive buying spree over the last two years.

Hopes for federal marijuana rescheduling hit a high in the third quarter of 2024, when the Biden administration scheduled hearings before a Drug Enforcement Administration judge.

But the lack of progress since then has sent stock prices plummeting and equity issuance grinding to a halt. Even President Donald Trump’s Dec. 18 executive order directing Attorney General Pam Bondi to move forward with cannabis rescheduling didn’t arrest the decline, with MSOs’ stock prices peaking just before the White House announcement and cratering after.

While the completion of rescheduling could provide a temporary boost to cannabis stock prices, significant institutional capital inflows will likely require broader banking reforms, such as the SAFER Act, according to the Viridian report.

Without regulatory clarity, M&A activity is expected to continue focusing on state-level consolidations in markets like Florida, Ohio, Missouri and Michigan.

However, public companies face challenges in acquiring smaller competitors because of valuation gaps.

International opportunities and emerging markets

As the U.S. market matures, some companies are turning their attention to international opportunities, particularly in Europe, Greiper said.

The European cannabis market, which mirrors the early-stage growth of the U.S. market in 2018, is attracting investment in medical cannabis and early-stage ventures.

Companies like Curaleaf have been particularly aggressive in pursuing European expansion, seeking growth opportunities outside of the saturated U.S. market, Greiper said.

A tired industry looks for solutions

Many cannabis operators are fatigued by the industry’s challenges. From fluctuating tax rates to declining prices and constant regulatory changes, the fight to remain competitive has taken its toll.

The weariness is driving more companies to seek exits, even at reduced valuations and with fewer all-cash offers.

Despite the challenges, the cannabis industry remains on an upward trajectory, albeit at a slower pace. The sector’s long-term-growth potential hinges on regulatory reform, innovative financing solutions and strategic M&A activity.

“Buyers need to acquire to supplement organic growth,” Greiper said. “Sellers want to get out. They’re not necessarily distressed. They’re just tired of fighting the fricking fight.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.