The light green bars in the graph show total capital raised by the Investment / M&A sub-sector of the cannabis industry. Q1:21’s $600 million is the 2nd highest total capital raised in the sub-sector since Viridian began tracking the cannabis industry in 2015.
The dark green line shows the average transaction size which has also accelerated to near record levels and is the proximate cause for the upswing in total capital raises. The gold line shows that the number of capital raise transactions, although rising slightly from the doldrums of 2020, has actually been trending downward since 2018.
The previous peak of $1.1 billion was driven by two large SPAC IPOs: Subversive ($575M) and Bespoke ($350M). Similarly, this quarters upswing was fueled by three large SPAC IPOs: Tuatara ($175M), Silver Spike II ($250M), and Choice ($150M).
We have tracked approximately $3.9 billion of cannabis SPAC IPOs but only $2.7 billion of de-spacing transactions to-date. Several SPACs have struggled to find large enough targets to meet their qualifying transaction thresholds and have been forced to put a number of transactions together and attempt tricky simultaneous transaction closes.
We expected to see smaller cannabis SPAC IPOs and more of them gravitating towards NEO listings which enable a broader selection of target investments. The first quarter’s activity has run counter to these expectations and seems to suggest an increased confidence on the part of sponsors that listing requirements may be liberalized prior to the 18-24 month deadlines.