Bengal Capital is excited to welcome current Chairman and former CEO of 4Front Ventures Josh Rosen, along with Jerry Derevyanny, former General Counsel of 4Front, to the team.
“When the results of Georgia’s Senate race were turning in favor of Democrats and New York Governor Andrew Cuomo proposed to legalize marijuana in his state, Curaleaf Holdings Inc. executives suddenly realized the company could benefit from some extra cash… in less than 24 hours, the company had raised more than $200 million by offering more stock on the Canadian Securities Exchange. ‘It was very unexpected in Georgia. That’s why we pulled the trigger as fast as we did, to prepare for what we think will be a very dynamic 2021,’ said Chairman Boris Jordan.”
Heading into 2021 the cannabis market is expected to heat up. From strategic acquisitions to accretive mergers, cannabis companies will continue to expand capacity in newly-legal states and solidify positions in states that are on the precipice of legalization. Viridian Capital, a cannabis data analytics and strategic advisory firm, estimates that the industry has a backlog of about $2 billion dollars in undisclosed deals in the new year. Cannabis companies will also have more dry powder to sate their appetite given increased investor confidence in the space due to the incoming unified Democratic government.
New Cannabis Ventures
Large capital raises should not worry investors, suggests Alan Brochstein of New Cannabis Ventures. The situation is different from post Canadian LP raises where companies were still building infrastructure and sales were nascent. U.S. companies have matured rapidly and are now showing significant sales and profit growth. Also, institutional interest is beginning to be felt, although liquidity is still a concern. Alex acutely remarks: “one of the challenges for [institutional investors] is actually finding enough stock. This was the reason the unnamed institution bought shares in a private transaction with GTI holders (twice). These offerings this week were priced at relatively narrow discounts on a bought-deal basis most likely because the underwriters are well aware of the demand. Beyond institutions, there is another aggressive large buyer in the market, the AdvisorShares Pure U.S. Cannabis ETF (NYSE ARCA: MSOS), which has been growing exponentially… In early December we described this ETF as a game-changer for the MSOs. At the time, the ETF had assets of $163 million. Over the past five weeks, it has soared to over $400 million… [driven by] primarily growth in the number of shares, which grew 61% in the past week alone.”
Needham & Company
Needham analyst Matt McGinley outlines the industry wins in 2020 and what to expect for 2021 -- “Strong industry growth and progress on regulatory reform drove significant equity appreciation among larger cap cannabis equities in '20. Into '21, we expect the market to be more discerning of geographic exposure, capacity to fund expansion, execution, and the ability to drive profitable growth… With state-level drivers of revenue looking similar in '21 to '20, we expect higher levels of M&A and more new public issuance, and think that infrastructure build-out will be the primary use of capital.” McGinley expects that existing markets rather than new are where most of the raised capital will be deployed, with capital market access opening the door to consolidation in markets like Canada and California and more bolt-on M&As to gain scale and allow for cross-state moves by existing MSOs.