Canopy may be best positioned for Cannabis 2.0
Debt capital is finally becoming more widely available to cannabis companies, according to one of the biggest bankers to the industry.
“You’re definitely going to see debt capital flow into the sector,” Dan Daviau, chief executive officer of Canaccord Genuity Group Inc., said in an interview at Bloomberg’s New York office last week. “That’s happening as we speak. You’ll see several debt deals announced over the next week or so.”
Although debt-like forms of financing such as convertible debentures are common in the pot sector, very few companies have issued true corporate debt. Trulieve Cannabis Corp. and Green Thumb Industries Inc. are two of the only cannabis companies to tap the fixed-income markets in a significant way.
Soon “four or five of the biggest guys are all going to have corporate-level debt,” according to Daviau. This is because some of the largest operators, particularly in the U.S., are beginning to report profitable quarters, making them more attractive to lenders.
While the flow of pot companies going public has virtually dried up, there’s still investor interest from “really rich family offices” and “massive hedge funds,” including one he met with last week that has US$46 billion under management, he said.
After an eight-month rout that saw cannabis stocks fall by approximately 60 per cent from their highs, Daviau believes the sector has hit bottom.
“You’ve had a lot of accounts betting against the sector and most of them are reversing those bets,” he said. “I think that’s a good sign of a bottom.”
It turns out Green Wednesday is a real thing. Dispensaries in California, Colorado, Nevada and Washington saw a 40 per cent jump in sales on the day before U.S. Thanksgiving compared to the average of the previous four Wednesdays, according to data from cannabis analytics firm Headset Inc.
This was in contrast to Black Friday, the busiest shopping day for most other retailers, when sales were actually six per cent below the average of the four previous Fridays, Headset said. This may have resulted from the magnitude of the discounts offered on Black Friday, when the average markdown was 19.1 per cent compared to 12.8 per cent on Green Wednesday.
“On Green Wednesday there was a modest increase in discounting but a large increase in sales volume, which suggests that consumers were there to stock up for the long weekend and were less price sensitive,” Headset said in its analysis.
Upcoming Events This Week
- Marijuana Business Daily holds its Investor Intelligence Conference in Las Vegas through Dec. 10
- Supreme Cannabis Co. holds its annual shareholder meeting in Toronto
- The National Women of Cannabis Conference is held in Las Vegas
- James E. Wagner Cultivation Corp. and EnWave Corp. will release results post-market
- Marijuana Business Daily hosts MJBizCon in Las Vegas through Dec. 13
--With assistance from Esteban Duarte.