U.S. cannabis firm Verano Holdings to seek public listing via RTO, eyes US$2.8B valuation
U.S. multi-state cannabis operator Verano Holdings LLC is planning to go public this month with a valuation of nearly US$3 billion, a sign that capital markets are warming up again to the marijuana industry following a chill in investment over the past year.
According to a term sheet distributed to investors, Verano is planning to offer up to US$75 million in shares through a reverse takeover of Majesta Minerals Inc. – a shell company listed on the Canadian Securities Exchange – that would value the company at US$2.88 billion. Canaccord Genuity and Beacon Securities are joint book runners on the deal.
If Verano completes its RTO and lists on the CSE, it would immediately become the third largest cannabis operator in the U.S. by revenue, and the fifth largest by valuation behind such rivals as Curaleaf Holdings Inc. and Cresco Labs Inc.
A Verano spokesperson declined to comment in an email to BNN Bloomberg.
Founded in 2014, Verano operates its cannabis business in 14 states with 1,600 employees, 46 retail locations, and eight production facilities. The company generated US$121 million in revenue and US$42 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) last year. The company estimates it will end 2020 with as much as US$380 million in revenue and US$160 million in adjusted EBITDA, according to an investor presentation.
The listing would also break a logjam that has seen relatively little cannabis-related initial public offerings over the past year. In the first 48 weeks of the year, US$2.1 billion was raised by pot-focused publicly traded companies, less than half of the US$5.6 billion raised in the same period a year earlier, according to Viridian Capital Advisors, a cannabis advisory firm.
However, investors have shown greater interest in investing in U.S. cannabis companies compared to their Canadian counterparts amid a string of profitable quarters from several major U.S.-based players. Overall sentiment has also been lifted by last month's U.S. election, in which six states approved measures to legalize recreational or medical cannabis programs.
Meanwhile, many Canadian cannabis companies continue to struggle to report profits. The sector has become increasingly competitive as many pot firms have booked billions of dollars of losses due to overspending on assets that failed to meet market demand.
Last month, Verano announced it was acquiring Alternative Medical Enterprises LLC, a cannabis operator with assets in Florida and Arizona. Terms of the deal were not disclosed.
In an interview at the time the deal was announced, Verano Chief Executive Officer George Archos said going public was "an option on the table and something that we're considering," but declined to comment on when that would occur.