Proactive Investors - The cannabis investment bonanza of 2021 may have come and gone, but there’s still evidence that traders are bullish on the sector’s upside, according to a report from New Frontier Data.
In 2021, the cannabis industry saw more than $12 billion in investments, but in 2022 that figure was just $4 billion. That doesn’t mean the industry is dying out, however.
The report, sponsored by cannabis investment firm Viridian Capital Partners and released by top industry market researcher New Frontier Data, suggests that investors have trimmed their portfolios to companies, states and even countries that have shown they know what they’re doing.
People are looking for firms that "have proven management teams, business models, and corporate strategy," said Scott Greiper, president and founder of Viridian Capital, in a statement.
To that end, the US grew its percentage of total capital raised from 71.7% in 2021 to 80.6% in 2022. Also on the rise were Australia and Malta, which each saw bumps in M&A activity last year.
That’s something of a surprise, according to Kacey Morrissey, senior director of industry analytics at New Frontier.
“The increase in Australia was four times the M&A activity in 2021; that level of increase typically follows new market legalization,” Morrissey said. “But Australia still does not have a legal regulated market for cannabis sales for adults."
'Suprising' amount of activity in one country
One country's cannabis sector was particularly surprising, Morrissey noted.
"In Malta, the amount in money relative to the size of country and density of population was surprising. Malta has a population of about 500,000 but there were $23 million in deals last year," Morrissey said. "Outside of the US and Canada, only Australia and Germany saw more money than Malta in M&A deals last year, and they have much higher populations.”
Meanwhile, the average size of equity raises fell 44% to $12.4 million in 2022 from $22.17 million in 2021, while the average debt raise decreased to $21.48 million from $45.72 million.
In terms of sectors, cultivation and retail continued to lead the way, but their percentage of M&A activity declined to 57% from 70%.
The full report can be found here.