This weekly series from Marijuana Business Daily and Viridian Capital Advisors provides the latest data on cannabis investment activity and M&A, along with key takeaways, analysis and trends based on recent market moves.
The data below, provided by Viridian Capital Advisors, is through the week ended Sept. 21.
Capital raises key takeaways:
- Newport Beach-based Pelorus Equity Group announced it closed a $25 million funding round, which it has deployed into 13 cannabis real estate projects across California. “Real estate continues to attract early money into newly legal states, and we’re seeing more funds like Pelorus make bets across various legal states,” said Scott Greiper, president at Viridian Capital Advisors.
- Australian medical marijuana company Althea Group announced it raised $20 million Australian dollars ($14.6 million) in its initial public offering. The firm began trading last week on the Australian Stock Exchange under the ticker symbol AGH and is working to build a facility in Victoria state to grow about three tons of dried medical cannabis flower per year. “This is an increasingly global industry and a trend that is not going to stop,” Greiper said. “As investors in these non-North American markets get more familiar with the investment opportunities and more companies go public, there will be more and more choices as to where to invest in cannabis.”
- Los Angeles-based marijuana extracts firm Field is poised to expand into new markets after closing a $6 million funding round. The deal is a more proof that cannabis brands have “become a favorite investment for this industry,” Greiper said.
M&A key takeaways:
- Scythian Biosciences (CNSX: SCYB) announced it acquired MMJ International Investments, which owns medical cannabis licenses in Argentina and can import cannabis. The deal highlights “continued interest in South America as a region for low-cost cannabis production and sourcing,” Greiper said.
- Canopy Rivers – the venture capital arm of Canopy Growth (NYSE: CGC) – completed a reverse takeover (RTO) of a company formerly known as Aim2 Ventures as part of its plan to go public. The company began trading on the Toronto Stock Exchange late last week.
- Multistate cannabis firm Acreage Holdings announced that it plans to go public in Canada via a reverse takeover, becoming the latest U.S. marijuana business to get its shares listed north of the border through an RTO. “This is the underlying theme for multistate operators that want to gain access to capital and move brands across state lines in the U.S.,” Greiper said. “You have to have capital to do that.”
Viridian Capital Advisors is a financial and strategic advisory firm that provides investment banking, M&A, corporate development and investor relations services to emerging growth companies and qualified investors in the cannabis sector.
Extraction Smackdown. Weighing the pros and cons of CO2 hydrocarbon and ethanol extraction methods.
Legalized MJ business in California is only for big money players who are willing to spend huge sums of OPM for the years necessary to open the doors and turn a profit. Investors have already lost millions in the uncertain developing market. Constantly changing rules and regs, multiple agencies in control, the necessity of local approvals, and corruption are just some of the failure points.
Such a disappointment for those of us who risked so much to grow for years before this sham legalization.
where & how would I invest in Cannabis ?
RE may be a hot topic in newly minted states with Cannabis regulations but clearly, over time that interest will cool off as competitive pressures exert themselves on the various economies present. When you see normalization of wholesale prices once the new wears off, only the efficient operators will survive as we are seeing here in Colorado. Three years ago, a cultivation license had strong value when connected to RE whereas today, not so much. Those old days of extraordinary wholesale and retail prices are truly things of the past and those coming up in this business today would be well advised to look at trending in states where such normalization is occurring (Colorado, Washington, Oregon). Additionally, technology is continuing to evolve and some of these existing operations are becoming more difficult to monetize if they cannot be operated efficiently. I good grower a few years earlier that cultivated raw materials out the door for $2,000 a pound (more or less) could make a good profit when their all in fully loaded operating costs were $1,000 a pound … now that quality indoor flower wholesale values are running in that range or less, not so much. I have seen NNN rents in CA run as high as $4 PSF per month … even harder to make a profit with that level of fixed expense so potential real estate moguls beware!
This is where I think the Canadian model breaks down at present as for example, one LP in Q1 of this new year generated $26M in revenues while posting an operating loss of $63M (netting out stock compensation) while growing approximately 9700 KG of material or the equivalent thereof. Using this basic information … 9700 KG cost approximately $89M to produce or about $9 a gram. Here in the US anyone operating at that level would have been out of business a long time ago (please note I do not include the revenue adjustments Canada accounting allows for materials that are essentially WIP for which they get credit nor as mentioned did I include the cost of Stock Compensations of about $30M).
This simplified sample is one reason I am not overly concerned about Canadians taking over the world although they certainly have a great head start on us from a legal perspective and banking!