From the Editor
Special purpose acquisition corporation: sounds like a shell company some unscrupulous executive uses to embezzle funds or procure discreet, unseemly things, doesn’t it?
Turns out, the truth behind such investment vehicles – or SPACS – is similarly shady.
Having the right investors is everything to an entrepreneur and that is especially true for anyone brave enough to start their own legal cannabis business. That is why entrepreneurs pitch investors and not the other way around: business owners want their financial backers to believe in them and the future success of their company.
Yet in the SPAC world, for reasons revealed in this edition of Weekly Chronicle, your investors may never even bother to learn your name or that of your business and your story will struggle to get told. History shows things do not tend to get better from there.
There have been a handful of high-profile SPACs (yes, I know Richard Branson has one) but in cannabis, they have mostly been where companies go to die. As cannabis-focused SPACs continue to proliferate, they could end up being the consolidators we have all been waiting for. Or, they could end up making an already messed up market even worse.
Yours in pursuit of progress,
Volume 1: Issue 5
by Jameson Berkow
Enough cannabis-focused special purpose acquisition corporations have been launched over the past 18 months to buy up half the sector. Seriously, $2.6-billion USD was raised by ELEVEN such SPACs between March 2019 and May 2020, according to Viridian Capital data. Some are heralding their arrival as saviours of a sector in desperate need of consolidation while others warn cannabis-focused SPACs offer little more than added chaos.
Joe Crouthers says special purpose acquisition corporations or SPACs are perfect for cannabis.
“I really do think it is a vehicle that is almost custom made to be useful to the unique situation that cannabis is in today,” the co-founder and CEO of Ceres Group Holdings said in an interview. “It is almost tailor made for cannabis.”
Having raised US$120-million on the NEO Exchange for a cannabis-focused SPAC in early March, Mr. Crouthers has good reason to advance a pro-SPAC perspective. He also has the benefit of momentum on his side.
Between March 2019 and May 2020, Viridian Capital data shows eleven cannabis and hemp-focused SPACs went public on North American stock exchanges, raising a combined US$2.6-billion. For perspective, that total is more than the total amount of money raised through cannabis-related initial public offers in 2018 and 2019 combined.