If you’ve been following the cannabis industry in 2020, you’ve likely heard the term “cash is king” more than once. This has become the industry consensus as stocks (mostly traded in Canada) began to slide after some disappointing earning numbers in the middle of 2019. That, in turn, resulted in decreased valuations and a reduction in investment capital.
The decreased valuations and capital required companies to reevaluate their growth strategies, and certain deals fell apart, including MedMen’s previously announced acquisition of PharmaCann. Even though it was an all-stock acquisition, in cancelling the deal MedMen stated that several of the assets being acquired would have required “significant capital expenditures.”
That was a clear sign that cash was tight and the prospects of raising more of it seemed bleak. Not surprisingly, MedMen announced a restructuring and revised growth strategy shortly after the deal was cancelled. Another deal that recently fell apart was Harvest’s acquisition of Verano. While the primary reason given for the cancellation was COVID-19’s impact on the various agencies that would need to approve the deal, the companies also cited adverse capital market conditions and a challenging environment for asset sales as reasons the deal was called off.
Read more at cannabis.lockelord.com