Cannabis companies increasingly look to SPACs to raise money

360 0

The cannabis space is rapidly embracing the idea of using the blank-check entities for funding

The cannabis industry continues to grow despite the many speed bumps in the way mainly caused by its current federally illegal status. Even large corporations in the industry struggle from time to time with cash shortages that, for any another industry, would be easily fixed by accessing the traditional banking system. But that is not an option for cannabis operators, who have had to look for alternative ways to get funding to maintain operations. One of those ways is finding special purpose acquisition companies (SPACs), which are becoming highly popular among cannabis ventures.

Particularly during the past year, cannabis ventures have been struggling with finding financing options for their operations after the new industry faced multiple challenges that brought down values in the stock market. Therefore, cannabis businesses have been using SPACs as a mechanism for accessing the public market and quickly gain access to raise capital. Another advantage is that these companies trade on major US exchanges – as long as none of them have plants growing in the US. From public offerings promoted by SPACs, cannabis companies have raised $2.2 billion from the third quarter of 2019 to today; the first half of this 2020 alone has helped companies to raise $620 million.

“The great thing about SPACs is you can sort of do M&A alongside this transaction and within it. You could be merging something in there that is a really interesting value-added piece… or it could be a single asset, that the story really is more about them now being public,” said Joe Crouthers, CEO of Ceres Group, the cannabis investment group that organized the SPAC Ceres Acquisition Corp.