March Round-up: Canadian Deal Flow’s on Fire While U.S. Market Lays Low
Earlier this year U.S. Attorney General Jeff Sessions repeatedly expressed his dislike for marijuana and its legalization. And while he also acknowledged that it is probably beyond his power to rein in the legal cannabis industry, American cannabis companies have for the most part maintained a low profile during these early days of the Trump Administration.
There’s been no such restraint, however, in the frenzied Canadian cannabis market, where national legalization is expected to take effect during the first half of 2018.
Deal activity in March reflected the growing excitement regarding cannabis north of the border — and the cautious mood to the south. Here are some of the month’s notable deals:
Ontario-based Resolve Digital Health raised C$5 million as it prepares to launch a dosed vaporizer delivery system called Breeze in California. The technology has been under development since 2015, when the company received a seed investment from CannaRoyalty Corp., another Canadian operator. Canadian producer Aphria Inc. led the round which was brokered by Canaccord Genuity Group Inc. Massachusetts-based CannaKorp Inc. which has developed a similar system, raised $4.1 million in January.
Bright Green Group of Companies has reached an agreement with the Acoma Pueblo Tribe to build a massive $160 million greenhouse on tribal land in New Mexico. If completed the planned facility would cover almost six million square feet, far larger than any other existing or proposed medical marijuana facility in the U.S.
Planned for tribal land, the facility’s supporters say it would be responsive to federal and tribal law. The facility would have space for 40 million medicinal plants, not all of which will be marijuana.
Vincent Mehdizadeh, founder of MedBox, a defunct California start-up that sold cannabis vending machines, reportedly reached an agreement with the SEC to pay $12 million in disgorgement and penalties. In addition Mehdizadeh agreed not to serve as a director or officer of a publicly-traded company. In 2014 the company presented itself as a leading company, but the SEC found that nearly 90 percent of the company’s reported revenue came from “sham transactions.”
Bloomberg reported that Australian hedge fund Tribeca Global Natural Resources Fund, managed by Tribeca Investment Partners, was the best performing fund globally thanks in part to bets on cannabis stocks. The fund climbed 145 percent in 2016 — the best return of the tens of thousands of funds tracked by the global data group Preqin. The fund also gained from positions in salmon, lithium, and cobalt.
On March 20, Canadian firm Canopy Growth Corp., the world’s largest public cannabis company, became the first cannabis stock to join the S&P/TSX Composite Index. To make that cut, companies must have traded on the Toronto Stock Exchange for more than six months and meet market capitalization and liquidity requirements. Canopy Growth began trading on the Toronto exchange in July 2016 after trading for about two years on the smaller TSX Venture Exchange.
Canadian producer CanniMed Therapeutics Inc. inked what it says is the first “exclusive pharmacy distribution agreement for medical cannabis” with PharmaChoice, a cooperative of hundreds of independent pharmacies across Canada. The collaboration begins with medical cannabis “education programs” for pharmacists, with the expectation that it will grow into a distribution partnership as the law allows.
Alberta-based Aurora Cannabis Inc. said it has taken a 19.9 percent stake in Cann Group Limited, the first company licensed to grow medical marijuana in Australia. Aurora agreed to match Cann Group’s IPO price of AUD $0.30 per share for a total investment of AUD $6.5 million. The joint lead manager and underwriters are Canaccord Genuity (Australia) Limited and PAC Partner Pty Limited.
Canadian marijuana companies have raised about C$700 million since the fall according to research from Canaccord Genuity Group Inc. Interest in the sector reached unprecedented levels in the fourth quarter of 2016 as investors anticipated full national legalization.
Baker, a Colorado start-up that makes customer retention software for dispensaries raised $1.6 million. The raise brings Baker’s total outside fundraising to $3.5 million. Existing investor Poseidon Asset Management led the round which also included participation from existing investors Michael Lazerow, Base Ventures, XG Ventures and Phyto Partners.
Israeli pharmaceutical company Therapix Biosciences went public on the Nasdaq. The deal netted the company $12 million before underwriting and other expenses. It plans to use the capital to re-purpose biosynthetic THC to treat Tourette Syndrome and mild cognitive impairment.