Cannabis Companies Hunt for Financing, Growth
ByJoanna GlasnerFollow | 09/25/15 - 10:51 AM EDT
NEW YORK (TheStreet) -- As more states move toward legalizing medical and recreational marijuana use, companies in the cannabis space have increasingly been taking their business to the public markets.
More than two years after Colorado and Washington became the first states to legalize recreational marijuana, the number of publicly traded cannabis companies has grown to more than 50.
Of these, most are thinly traded companies that trade over the counter. A few, meanwhile, have graduated to Nasdaq, along with a handful of mid-cap companies that didn't start out in the marijuana business but now have activities in that space.
What most of these cannabis-focused companies share is an appetite for capital to fuel what has emerged as one of the country's largest growth sectors.
"People are rationally exuberant about the cannabis industry. They want to be part of the next great American industry," said Troy Dayton, CEO of ArcView, a legal cannabis-focused investor network and market research firm. ArcView estimates that the U.S. legal cannabis market grew from $1.5 billion in 2013 to $2.7 billion in 2014. It projects sales will hit $3.5 billion this year. There's potential for more supercharged growth ahead as well, particularly if voters in California approve a proposed initiative that could make it to the 2016 ballot to legalize recreational marijuana use.
To date, most accredited investor activity in the cannabis space has involved funding private companies. However, as more small companies list on exchanges, more dealmaking is moving to public markets. Since last year, more than a dozen companies with cannabis-related business activities have raised money through private-investment-in-public-equity offerings, according to PrivateRaise, The Deal's data service that tracks the PIPE market.
The sums invested in companies with cannabis businesses tend to be on the small side for PIPE transactions, with the vast majority below $15 million. So far this year, the list of PIPE investments includes $10.7 million for Medbox (MDBX) , a provider of vaporizer products and consulting services to cannabis businesses that trades over the counter under the symbol MDBX; $2 million for Terra Tech (TRTC) , a provider of hydroponic equipment for produce and cannabis cultivation traded over the counter as TRTC; $1.8 million for GrowBlox Sciences (GBLX) , a developer of cannabis-based medical treatments traded over the counter as GBLX; and $1.1 million for MassRoots ( MSRT ) , which operates a mobile platform for cannabis content and commerce and is traded over the counter as MSRT .
Generally, it's easier for legal cannabis companies to raise smaller rounds than larger ones, Dayton says, as the pool of investors is dominated by high-net-worth individuals and small funds focused on the space. Large institutional investors commonly still shy away from cannabis businesses, due to concerns about reputation and the fact that marijuana is still illegal under federal law.
That said, a few companies with some cannabis-related activities have raised sums in the tens of millions. These tend to be companies for which cannabis is a component of the business, rather than the primary focus. One example is 22nd Century (XXII - Get Report) , which is best known as a purveyor of low- and high-nicotine cigarettes, but also operates a cannabis-focused subsidiary called Botanical Genetics. Since 2011, the Clarence, N.Y., company has raised more than $24 million in at least five PIPE transactions, with the most recent deal, for $6 million from Empery Asset Management, closing in June.
Arena Pharmaceuticals (ARNA) , a developer of treatments for obesity, vascular diseases and other ailments, also is pursuing researching medical cannabis applications and has repeatedly tapped the PIPE market. Since 2009, the San Diego-based company has raised more than $360 million through PIPEs, including most recently a $70 million transaction in 2012. Investors include Deerfield Management and Acqua Wellington Asset Management.
http://www.thestreet.com/story/13301492/1/can...rowth.html
ByJoanna GlasnerFollow | 09/25/15 - 10:51 AM EDT
NEW YORK (TheStreet) -- As more states move toward legalizing medical and recreational marijuana use, companies in the cannabis space have increasingly been taking their business to the public markets.
More than two years after Colorado and Washington became the first states to legalize recreational marijuana, the number of publicly traded cannabis companies has grown to more than 50.
Of these, most are thinly traded companies that trade over the counter. A few, meanwhile, have graduated to Nasdaq, along with a handful of mid-cap companies that didn't start out in the marijuana business but now have activities in that space.
What most of these cannabis-focused companies share is an appetite for capital to fuel what has emerged as one of the country's largest growth sectors.
"People are rationally exuberant about the cannabis industry. They want to be part of the next great American industry," said Troy Dayton, CEO of ArcView, a legal cannabis-focused investor network and market research firm. ArcView estimates that the U.S. legal cannabis market grew from $1.5 billion in 2013 to $2.7 billion in 2014. It projects sales will hit $3.5 billion this year. There's potential for more supercharged growth ahead as well, particularly if voters in California approve a proposed initiative that could make it to the 2016 ballot to legalize recreational marijuana use.
To date, most accredited investor activity in the cannabis space has involved funding private companies. However, as more small companies list on exchanges, more dealmaking is moving to public markets. Since last year, more than a dozen companies with cannabis-related business activities have raised money through private-investment-in-public-equity offerings, according to PrivateRaise, The Deal's data service that tracks the PIPE market.
The sums invested in companies with cannabis businesses tend to be on the small side for PIPE transactions, with the vast majority below $15 million. So far this year, the list of PIPE investments includes $10.7 million for Medbox (MDBX) , a provider of vaporizer products and consulting services to cannabis businesses that trades over the counter under the symbol MDBX; $2 million for Terra Tech (TRTC) , a provider of hydroponic equipment for produce and cannabis cultivation traded over the counter as TRTC; $1.8 million for GrowBlox Sciences (GBLX) , a developer of cannabis-based medical treatments traded over the counter as GBLX; and $1.1 million for MassRoots ( MSRT ) , which operates a mobile platform for cannabis content and commerce and is traded over the counter as MSRT .
Generally, it's easier for legal cannabis companies to raise smaller rounds than larger ones, Dayton says, as the pool of investors is dominated by high-net-worth individuals and small funds focused on the space. Large institutional investors commonly still shy away from cannabis businesses, due to concerns about reputation and the fact that marijuana is still illegal under federal law.
That said, a few companies with some cannabis-related activities have raised sums in the tens of millions. These tend to be companies for which cannabis is a component of the business, rather than the primary focus. One example is 22nd Century (XXII - Get Report) , which is best known as a purveyor of low- and high-nicotine cigarettes, but also operates a cannabis-focused subsidiary called Botanical Genetics. Since 2011, the Clarence, N.Y., company has raised more than $24 million in at least five PIPE transactions, with the most recent deal, for $6 million from Empery Asset Management, closing in June.
Arena Pharmaceuticals (ARNA) , a developer of treatments for obesity, vascular diseases and other ailments, also is pursuing researching medical cannabis applications and has repeatedly tapped the PIPE market. Since 2009, the San Diego-based company has raised more than $360 million through PIPEs, including most recently a $70 million transaction in 2012. Investors include Deerfield Management and Acqua Wellington Asset Management.
http://www.thestreet.com/story/13301492/1/can...rowth.html
