Even With Downturn, Cannabis Market Is Still Attractive To Investors Says New Report

Cannabis investments might have taken a dip since its height in 2021 when it racked up over $12 billion, yet there is still activity going on in this space—even if investors have had to adjust their expectations.

According to a new report sponsored by cannabis investment firm Viridian Capital Partners and released by top industry market researcher New Frontier Data, investors continue to eye the cannabis industry for its boundless potential. However, with the downturn in the market, they’ve also had to recalibrate their strategies with many narrowing their focus to certain states, countries and operators that “have proven management teams, business models, and corporate strategy,” noted Scott Greiper, president and founder of Viridian Capital, in a statement on the study.

Among the report’s key findings are the following:

*A combination of economic headwinds and dampened expectations for federal action shrank North American capital raises to $4 billion in 2022;

*The U.S. continued to attract the majority of investor capital in 2022, growing as a percentage of total capital raised, from 71.7% in 2021 to 80.6% in 2022;

*Cultivation and retail remained the leading sectors for M&A activity at 57% in 2022; however, the cultivation/retail sector represented 70% of the activity in 2021; and,

*The average size of equity raises decreased 44% from $22.17 million in 2021 to $12.40 million in 2022, whereas the average size of debt raises decreased from $45.72 million in 2021 to $21.48 million in 2022.

Asked what was the most surprising about the report’s findings, Kacey Morrissey, senior director of industry analytics at New Frontier Data, said it was the volume of increase in M&A activity in countries like Malta and Australia between 2021 and 2022.

“The increase in Australia was four times the M&A activity in 2021; that level of increase typically follows new market legalization,” noted Morrissey. “But Australia still does not have a legal regulated market for cannabis sales for adults. 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. Outside of the U.S. and Canada, only Australia and Germany saw more money than Malta in M&A deals last year, and they have much higher populations.”

To download a copy of Cannabis Capital:2023 Industry Report, click here.