The recent surge in the cannabis debt market is akin to a wildfire in a dry forest! Five monumental deals showcased on the chart blazed their trails within the third quarter of 2024, with a staggering total of approximately $632M in proceeds. This fiery figure surpasses any quarterly record since the tail end of 2021.

The visually striking chart portrays the cost-effectiveness of the transactions on the vertical axis, juxtaposed against the Viridian Credit Ranking at the time of the deal on the horizontal axis. The near-perfect alignment of the regression line, with an R-squared of .91, indicates that the market is adeptly factoring in the credit risk of issuers when pricing new offerings.

Among these luminaries, TerrAscend’s outlier status shines bright with a 12.75% cost—a surprisingly lower yield than anticipated. This anomaly is attributed to TSND’s credit ranking, which, despite being less than stellar initially, has now improved by three notches to #11, thanks in part to the liquidity relief the new financing brought.

Notably, the Jushi transaction for first-priority notes has garnered increased interest, now quoting nearer to 17%.

All the deals on display signify refinancings of existing debt. Prior to these, additional refinancing worth $114M had transpired earlier in the year involving AYRWF, PharmaCann, and CBSTF.

Breaking the mold, private entities have also secured substantial growth capital debt, with Sunburn sealing a $40M deal and Nova landing $20M in funding.

In a daring move this week, Acreage took to the refinancing stage, unveiling the voracious appetite investors have across the credit spectrum. Despite Viridian pegging Acreage at a modest #28 out of 31 due to its staggering total liabilities, the company’s liquidity boost from the transaction hints at a probable uptick in its ranking down the line.

As the equity markets stand at a crossroads, cautious and anxious, either awaiting S3’s next move or developments on the SAFE front, the debt market steps in as the valiant rescuer, continuing to be the lifeline for both pristine credits like Green Thumb and more precarious underwritings such as Jushi and Acreage.

The Viridian Capital Chart of the Week meticulously outlines pivotal investment, valuation, and M&A trends sourced from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker is the reliable compass guiding cannabis companies, investors, and acquirers, aiding in informed decisions regarding capital allocation and M&A strategies. This service is a beacon that monitors and dissects capital raises and M&A activities within the legal cannabis, CBD, and psychedelics sectors. Each week, the Tracker amalgamates and dissects all closed deals, segmenting them along key metrics.

• Beating to the sectoral drum (tracking the flow of capital and M&A)

• Examining deal structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A)

• Comprehending the status of the company announcing the transaction (Public vs. Private)

• Decoding the key deal terms like Pricing and Valuation

• Mapping the deals by the location of the Issuer/Buyer/Seller

• Scrutinizing credit ratings, leverage ratios, and liquidity ratios

Since its inception in 2015, the Viridian Cannabis Deal Tracker has meticulously monitored and dissected over 2,500 capital raises and 1,000 M&A transactions, totaling over $50 billion in cumulative value.

The preceding revelatory account is a testament to the current fervor in the cannabis debt market, igniting optimism among investors and entities alike!