Over the past year, fundraising by special purpose acquisition companies (SPACs) has skyrocketed. In fact, more than $2.5 billion has been raised by SPACs. With that in mind, are SPAC transactions the way forward for cannabis companies, compared to traditional IPOs? In a recent webinar hosted by ICR and IPO Edge, two panels of experts discussed SPAC fundraising and other considerations for dealmaking in the cannabis industry.
SPACs vs. Traditional IPOs in the Cannabis Industry
Traditional IPOs in the cannabis industry have struggled, especially recently, with a severe valuation compression over the past several years — even for some of the biggest, most influential cannabis companies. In light of this, SPACs have become more popular. While they aren’t easy, they can set the stage to draw institutional and retail sponsorship and bring businesses to market.
Other Fundraising Options for Cannabis Companies
Crowdfunding has been effective for some companies that have a close relationship with consumers who also want to be investors. Regulation A+ IPOs have also tried to capture the connection between consumer and investors. And as regulations change to raise the cap for Regulation A+ IPOs (from $50 million to $75 million) and expand the term limit from one to three years, more companies may begin to consider this type of fundraising.
Exploring Potential Cannabis Targets
As SPACs continue to raise money at record pace, there are several cannabis-focused SPACs seeking targets. And fortunately for those SPACs, there are many cannabis-focused companies that are in need of working capital. Overall, there are many companies to target — and more to come. Experts see many businesses being created — both technology-driven businesses and science-based research businesses — that have tremendous potential for growth.
To listen to the full panel discussions, access the full webinar replay or complete the form below to view the webinar deck.