There is so much Canadian cannabis investment money right now that it is cascading down into the United States and Canadian investors are easily outbidding domestic acquirers. Our neighbors north of the border don’t have enough deals to go around in their marijuana markets, so they are buying up whatever companies they can in America and they are happy to pay premium prices.
“We’ve been seeing it for the last seven to eight months and it’s only picking up steam,” said Viridian Capital Advisors President Scott Greiper. He noted that the Canadian companies are flush with cash that they’ve raised in the public markets and there are only so many deals in Canada for investment. “They are taking an aggressive stance,” he said with regards to chasing after American properties.
Some recent deals, according to Viridian, include THC BioMed International acquiring Clone Shipper, Aphria acquiring an equity stake in Copperstate Farms, Canadian Bioceutical Corporation acquiring PerkAZ Property and Alternate Health Corp. acquiring a minority stake in Clover Trail Capital and that’s just since March. Canadians are also willing to take the risk and invest big money, whereas U.S. investors are still only willing on average to commit less than half a million.
Canadian investors are also finding many ways around residency requirements. Greiper said they will invest heavily in a company if they can’t buy it outright or set up a consultancy practice to indirectly run a company. “For the most part they are sticking to their spots,” he said. “Growers are buying growers.”
Andy Williams, Chief Executive Officer of Medicine Man in Colorado, agrees. “Their whole play is to gobble up everything they can,” he said. “When I tell them a price I want, which is high, they don’t even blink. Then when they realize they can’t take the company public, they leave.” Medicine Man is one of the top-rated dispensaries in Colorado and the single largest dispensary in Denver. Williams said the Canadian investors aren’t the only game in town. “I’ve been approached by legal tobacco and big alcohol. It’s no secret the Busch family is looking at this industry to come up with a plan.”
“Canada looks like what the U.S. would look like if it were more amenable,” said Derek Peterson, Chief Executive Officer of cannabis agriculture company Terra Tech Corporation. “You’ve got all these Canadian companies with 15x multiples making acquisitions. They’re getting first mover advantages and they can execute faster than U.S. based companies.” He added that the U.S. companies can’t afford to pay what the Canadian companies can. “Their valuations are off the charts and the U.S. companies can’t match these levels that aren’t dilutive for the Canadians,” he added.
Many in the cannabis industry are ready to cash out. They’ve been on the front lines for years and have grown tired of the endless battles to keep the gains they’ve made. Some have found they aren’t making the money they thought they would make and are tired of waiting for it to get easier. “It’s just constant battles,” said Williams. “I’ve got in-house lawyers, corporate lawyers, tax lawyers, criminal lawyers.” This marijuana industry fatigue is music to the ears of Canadians.