Cannabis Financing: 2021 Year in Review

Cannabis Financing: 2021 Year in Review
Cannabtimes

<![CDATA[Capital raise activity exploded out of the blocks in the first half of 2021, buoyed by hopes that the new Democratic presidency and Senate majority would finally produce a legalization breakthrough.Investors bid up cannabis stocks in Q1 2021 to levels that hadn’t been seen since early 2019, and equity issuance followed with Q1 becoming the highest equity raise quarter in cannabis history. COVID fears had started to dissipate as growing vaccination rates began to reduce hospitalizations and deaths. It seemed like economic life would return to some semblance of normality.In cannabis land, however, the legalization buzz wore off and stocks began a steep 10-month decline that would leave them 51% below their peaks by year end, and equity issuance followed downward. The saving grace for cannabis capital was a newly invigorated debt market, fostered by the entrance of new institutional capital and riding on the improved profitability of the industry—at least in the U.S.Capital Raise ActivityCapital Raise Transactions and Invested Capital DeclinesWe tracked 455 capital raises totaling $12.8 billion in 2021 representing an increase in the number of deals of 50.7% and a 195.4% increase in the dollar volume of deals vs. 2020.  The second half of 2021 was softer with declines of 29.6% in transaction numbers and 30.3% in capital raised vs. the first half of 2021. Shift in Capital Allocation by Industry SectorOf our 13 industry sectors, Cultivation & Retail continued to lead with 62.3% of all invested capital, up from 58.9% in 2020. The second most active sector was Investments/M&A with 9.1% of all invested capital, up from 7.9% in 2020, due to five SPAC IPOs totaling $943 million. Software showed the largest decline from 2020 in percentage of invested capital raised even though the total capital raised was up.   Debt Increases as a Percentage of Total Capital…

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