Transactional Activity: Week 25 ended June 19, 2020 saw a slight slowdown in activity vs. the prior week this year. We recorded 3 capital raise transactions totaling $59.6 million, vs. 9 transactions totaling $158.8 million during the same week in 2019. Average tranche size was $19.9 million this week, vs. $17.6 million in the prior year period, which was largely influenced by the Charlotte’s Web transaction.
Largest Cap Raise: Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF), closed its previously announced underwritten public offering for aggregate gross proceeds to the Company of C$77,625,000. A total of 11,500,000 units of the Company at a price of C$6.75 per Unit were sold pursuant to the Offering, including the full exercise of the over-allotment option by the Underwriters. Each Unit was comprised of one common share of the Company and one half of one common share purchase warrant. Each Warrant will be exercisable to acquire one common share for a period of 2 years following the closing date of the Offering at an exercise price of C$8.50 per Warrant Share, subject to adjustment in certain events. Net proceeds from the Offering are expected to be used primarily to fund the Company’s business development and for general working capital purposes.
Public vs. Private Cap Raises: Of the 3 capital raises, all were closed by public companies. So far in 2020, public companies have accounted for 83% of all capital raises, vs. 66% for the same period in 2019. In 2020, public companies have accounted for 91% of total dollars raised, vs. 72% for the same period in 2019. The dramatic recovery in cannabis stocks, both in terms of price and volume, is driving public companies to the capital markets to seek both equity and debt financings.
Public Company Listings: Of the 3 public company capital raises, 3 are listed on Canadian exchanges (2 on the CSE and 1 on the TSX), and all 3 are also U.S. exchange listed (all on the OTC Market).
Equity vs. Debt Cap Raises: Equity-based capital raises accounted for all 3 transactions. This is the first time this year that we have not reported on a debt raise as part of total capital raises.
Cap Raises by Sector: The 3 capital raises occurred in 3 different sectors – one each in Infused Products & Extracts, Hemp and Biotech/Pharma.
Mergers & Acquisitions
Transactional Activity: Week 25 saw 2 M&A transactions, vs. 8 in the prior year period. Though M&A activity is still far below the levels seen during the first half of 2019, we have begun to see a pickup in weekly activity. This is likely driven by the nearly 7-week increase in capital raise activity and stock price performance of public cannabis companies, which have been the dominant acquirers.
Largest M&A Transaction: IGNITE International Brands, Ltd. (CSE:BILZ, OTCQX: BILZF) a global consumer packaged goods brand, announced the closing of the remaining 90% of the issued and outstanding equity securities of Ignite Distribution, Inc. that it did not previously own. IGNITE issued an unsecured promissory note in the amount of US$3.35 million bearing an annual interest rate of 10%, and maturing on June 11, 2022.
Public vs. Private: Both acquisitions were made by public companies as has been the case in 90% of M&A transactions announced in 2020. Public companies, particularly with the recovery in stock prices and fund raising ability, have been the dominant acquirers in the cannabis industry. Of the acquired companies, both were private. Private companies remain the dominant targets for acquirers.
M&A by Sector: Buyers came from 2 different sectors, 1 each in Cultivation & Retail, and Infused Products & Extracts.