Friends,
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:
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