21 Feb Latest SPACs Seek Cannabis Mergers

Originally pioneered in the 1990s, special purpose acquisition companies, or SPACs, have gone in and out of Wall Street favor since. Currently enjoying a renaissance, SPACs are public companies that raise money then seek a private business that wishes to go public and access the entity’s cash for its operations and growth.

According to Nasdaq, the exchange listed 43 SPACs in 2019. These companies raised $8.3 billion. Since the latest wave started in 2010 over 170 SPACs have listed on Nasdaq, raising over $30 billion. The SPACs list almost exclusively on Nasdaq; there is a similar program in Canada. Some raise in the $30-50 million range, another group raises over $100 million. Underwriting firms raise the money, investors like that they can get their money back and “opt out” of the merger if they do not wish to participate.

In 2019, Nasdaq started allowing U.S. cannabis companies to list on the exchange so long as they are not directly involved in the growth or sale of cannabis. Greenlane Holdings, a vape company, was first. The second is now called Akerna, but started as a SPAC that merged with MJ Freeway, a leading cannabis software business. This led a number of SPAC-meisters to focus more on the industry. Each SPAC is free to merge with any business, but almost all express a preference for the industry or region from which they are seeking a business combination.

New Cannabis Ventures reports there are now nearly a half dozen SPACs seeking a merger with a cannabis company. These companies are raising cash at a time when the capital markets are nervous about the industry following precipitous drops in many public cannabis stocks along with continued losses these companies are facing. By offering cash-starved cannabis businesses some liquidity in their ownership as well as adding to their coffers for growth and overhead, these SPACs may indeed have successfully timed their opportunity. Stay tuned.