Once Taboo, SPACs Are Now the Main Driver of Fundraising and New Growth in Cannabis
LOS ANGELES, Nov. 1, 2021 /PRNewswire/ -- For U.S. cannabis companies looking to raise capital for operations that deal in a federally illegal substance, IPOs on American markets aren't a viable option. Other traditional capital sources—banks, for example—are equally off limits. The constraints set up a perfect environment for special purpose acquisition companies (SPACs) to thrive—and thriving they are.
SPACs are well-suited to the rapidly evolving dynamics of the cannabis industry, allowing companies to list on a stock exchange earlier than they might be able to launch an IPO—primarily in Canada, though a few have landed on the NASDAQ. Because they represent significantly higher liquidity than other vehicles, SPACs attract risk-tolerant investors who typically avoid directly participating in cannabis ventures. Even top-tier firms J.P. Morgan and BMO Capital Markets have backed cannabis SPACs within the past year.
"SPACs have existed since the early 1990s in conventional markets but are only now gaining traction in cannabis," said Christopher Jones, senior editor for mg Magazine. "With federal legalization potentially on the horizon and increasing pressure from large, well-funded Canadian entities, American companies need to find a way to scale now, not later. SPACs are a very attractive option."
This year has seen explosive activity, with nine SPAC mergers totalling roughly $5 billion in qualifying transactions completed between January and August. In October, 22 cannabis SPACs sought a combined $3.9 billion in investment.
"We expect the pace of both launches and completions—along with the size of qualifying transactions—to pick up in 2022," Jones said.
Read mg Magazine's November issue here. Print copies are available by subscription.
About mg Magazine:
Founded in 2015, mg Magazine is the media of record and industry authority for senior executives operating within the cannabis industry. Dubbed "weed's hybrid of Forbes and Inc.," mg serves its multi-platform audience in-depth features, business news, analysis, and other content designed to inspire, educate, and inform. mg is published by Incunabulum LLC. For more information.
LOS ANGELES, Nov. 1, 2021 /PRNewswire/ -- For U.S. cannabis companies looking to raise capital for operations that deal in a federally illegal substance, IPOs on American markets aren't a viable option. Other traditional capital sources—banks, for example—are equally off limits. The constraints set up a perfect environment for special purpose acquisition companies (SPACs) to thrive—and thriving they are.
SPACs are well-suited to the rapidly evolving dynamics of the cannabis industry, allowing companies to list on a stock exchange earlier than they might be able to launch an IPO—primarily in Canada, though a few have landed on the NASDAQ. Because they represent significantly higher liquidity than other vehicles, SPACs attract risk-tolerant investors who typically avoid directly participating in cannabis ventures. Even top-tier firms J.P. Morgan and BMO Capital Markets have backed cannabis SPACs within the past year.
"SPACs have existed since the early 1990s in conventional markets but are only now gaining traction in cannabis," said Christopher Jones, senior editor for mg Magazine. "With federal legalization potentially on the horizon and increasing pressure from large, well-funded Canadian entities, American companies need to find a way to scale now, not later. SPACs are a very attractive option."
This year has seen explosive activity, with nine SPAC mergers totalling roughly $5 billion in qualifying transactions completed between January and August. In October, 22 cannabis SPACs sought a combined $3.9 billion in investment.
"We expect the pace of both launches and completions—along with the size of qualifying transactions—to pick up in 2022," Jones said.
Read mg Magazine's November issue here. Print copies are available by subscription.
About mg Magazine:
Founded in 2015, mg Magazine is the media of record and industry authority for senior executives operating within the cannabis industry. Dubbed "weed's hybrid of Forbes and Inc.," mg serves its multi-platform audience in-depth features, business news, analysis, and other content designed to inspire, educate, and inform. mg is published by Incunabulum LLC. For more information.
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