This week, news crossed the wires of another “blank check” cannabis company offering shares to the public, Greenrose Acquisition Corp. (link). The term explains exactly what happened – the sponsors have raised money from investors (who wrote them the metaphorical “blank check”) in a new company that has no assets, giving the company dry powder to go and find cannabis industry acquisition opportunities.
Also called a “special purpose acquisition corporation” (SPAC), this kind of company has a mandate to invest capital within a certain period of time, or else it gets returned to the shareholders (there are other limitations and guidelines as well, such as the first acquisition must be for at least 80% of the escrowed cash). Greenrose’s shares are listed on the Nasdaq stock exchange, and they were successful at raising $150 million of dry powder by selling stock at $10 a share, with an attached (meaning, the buyer gets it with the stock) warrant at $11.50 a share – the warrant is the incentive for the investor to take the speculative risk of investing into a SPAC.
Coming at a time when it is generally difficult to raise equity capital (a point I have made many times in these Cannabis Musings, and was also recently made in an article in Marijuana Business Daily (link), it is a positive sign that Greenrose was able to publicly raise $150 million of equity to go and find acquisition deals in this market. One of the challenges for any exchange-listed cannabis SPAC, however, is the reluctance by US exchanges to list a plant-touching company, a scenario avoided last summer when MTech Acquisition Corp, another cannabis SPAC, acquired MJ Freeway (now known as Akerna), an ancillary business (and something noted by Greenrose in its offering prospectus (link).
As the industry generally remains cash-challenged, companies and investors are still finding ways to create opportunities.