Cannabis companies on pace to raise record $8 billion in 2018

Cannabis companies across the globe are on pace to raise a record $8 billion by the end of 2018 as more companies go public and scale to meet growing demand, an analysis of recently released market data shows.

Through the end of June, cannabis companies raised a record $4.3 billion – more than triple the amount of funding in 2017, according to Viridian Capital Advisors, which tracks fundraising and merger and acquisition activity across the industry.

Canadian cannabis firms accounted for more than half the activity, while U.S. and international firms represented the balance, according to Viridian. A detailed breakdown by geography was not available.

Cannabis cultivation and retail firms rang in as the leading fundraising sector with more than $2.5 billion raised through the first half of the year.

The $4.3 billion raised in the first six months of this year already exceeds the full-year totals from 2017 ($3.5 billion), 2016 ($1.3 billion) and 2015 ($0.9 billion).

The activity to date is a strong signal of another year of record growth for the booming marijuana industry, said Harrison Phillips, vice president at Viridian.

With the fundraising rally projected to continue, here’s a breakdown of the trends underway and what to expect as the second half of 2018 unfolds.

Big deals are the big deal

As more firms turn to public capital markets to raise money to fuel their growth, the average size of deals is growing as well, according to Viridian.

So far this year, the average equity raise has rung in at $12.8 million, up from $7.1 million in 2017. The average size of a debt-financing deal in the first half of the year was $22.1 million, compared with $4.9 million last year.

And the big deals have continued in the second half of the year. Among the largest raises to recently close:

Public companies by far have led the fundraising pack so far this year, a signal that 'stigma' in the industry is waning and investor interest is spiking, said Scott Greiper, president at Viridian.

Fundraising by sector

Cultivation and retail firms continue to lead the industry in fundraising with more than $2.5 billion raised through the first half of the year.

That compares with roughly $600 million in 2017.

No other cannabis sector has scaled the billion-dollar fundraising mark yet this year. Cannabis investment firms have raised roughly $900 million. On the horizon, Phillips projects fundraising activity will grow across:

  • Cannabis biotech “due to increased interest in the clinical research of the cannabis plant and the potential medical efficacy of the phytocannabinoids contained therein,” he said.

  • Infused product and extract companies, which “have been raising more capital as consumer trends shift to new product offerings, such as foods, beverages and cosmetics that are infused with cannabis.”

Poised to take the public plunge

Private cannabis firms are seeking listings on public exchanges as they hustle to raise capital to fuel their growth.

Recent examples include Los Angeles-based MedMen and Chicago-based Green Thumb Industries. Each completed reverse takeovers of public shell companies in Canada to list on the Canadian Securities Exchange.

It’s a trend that’s likely to pick up as the year continues, Phillips said, with a number of firms already charting a course to go public in Canada.

“Canadian exchanges are affording favorable valuations to businesses above and beyond what they would have in the private markets, so operators are listing to also have access to lower costs of capital,” he said.

The above content is an excerpt from Marijuana Business Daily.

You can read the original story here.

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