Cannabis Investors Are Writing Blank Checks

This is a copy of the July 21st edition of our weekly Newsletter, which we have been publishing since October 2015.


Almost $2 billion worth of capital is waiting to be deployed into the cannabis sector, and the financial media has been slow to notice this new development. This potential capital isn’t being raised by established private or public entities but instead by low-key special purpose acquisition companies (SPACs). Two sponsors of previous deals have returned to the market, Mercer Park and Canaccord Genuity, and several others have joined them.

SPACs in general have very specific rules that offer IPO investors protection, like the ability to redeem their investment as we saw with the MTech (now Akerna) deal. In Canada, the only exchange that currently lists SPACs is the NEO, which has a spotty record of liquidity thus far. The good news, though, is that these SPACs can invest in either direct or ancillary cannabis companies operating in the United States. In the U.S, we have seen one NASDAQ SPAC close its acquisition when Akerna bought MJ Freeway, and, for now, these SPACs will be limited from buying American cannabis operators but able to invest in American ancillary companies, CBD companies and non-U.S. companies operating under a federally legal program.

As the table below indicates, three cannabis SPACs were priced from late 2017 until 2018, with all of them subsequently completing qualifying transactions. The floodgates have opened in 2019, with five deals having closed, two of which were priced earlier this month, and another that is pending:

The pending deal caught our attention, as the management team of Bespoke Capital Acquisition Corp includes the former CEO of Diageo, Paul Walsh, who will serve as Executive Chairman, and a former Regional President of Pfizer Consumer Health North America, Peter Caldini, who will serve as CEO.

Not only has the number of deals increased, but so has the size, with the total raised this year exceeding US$ 1.8 billion (assuming the Bespoke deal is priced). The investment into these SPACs is a clear sign of the interest in our sector, and the deployment of this capital is quite bullish for privately held cannabis companies looking to go public. The trend, though, may be a slight negative for current public companies, as investors are opting to bet on these blank check companies, without even knowing what they will ultimately acquire rather than those that are currently trading despite the recent pullback in prices. Additionally, the ability to use cash to fund acquisitions may put the SPACs in a competitive advantage over other public companies looking to pursue M&A. 

As far as investing in SPACs, we have seen no evidence thus far that investors need to get in early. Most investors will be better served by waiting until a pending acquisition is announced or even closed. The Columbia Care deal has suffered a substantial price decline that prompted a share repurchase announcement, AYR Strategies has given up a lot of gains, and Akerna went on a rocket ride and quickly returned to earth. We look forward to sharing with our readers how this capital is deployed over the the next couple of years.

Green Peak Innovations is the largest vertically integrated medical-use cannabis license holder in Michigan, which is one of the biggest medical-use cannabis markets in the country. Earlier this year, GPI raised additional capital to continue its expansion in Michigan, and recently it announced the signing of a definitive agreement to acquire one of only 22 vertical licenses in Florida. Earlier this month, Green Peak opened its first of an anticipated 30 medical cannabis provisioning centers in Michigan.

To learn more about Green Peak Innovations, a client of New Cannabis Ventures, visit the company’s page that we maintain on its behalf and click the green Get More Info button.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index.

View the Public Cannabis Company Revenue Tracker, which ranks the top revenue producing cannabis stocks that generate industry sales of more than $5 million per quarter.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Consider subscribing to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013 for more in-depth information and market intelligence about the publicly traded cannabis sector.

Find your place in the cannabis industry by visiting our Careers and Jobs Page and learn which companies are hiring aggressively.


Alan & Joel

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

Get Our Sunday Newsletter