Friends, news came this week of another prominent cannabis SPAC acquisition (known as a “de-SPAC”), with the announcement that Weedmaps will be acquired by Silver Spike Acquisition Corp. (link) A number of cannabis SPAC de-SPAC deals have announced recently, enough to possibly call it a trend.

What’s behind the recent cannabis SPAC de-SPAC’ing spate? In my opinion (which I’ve developed talking to industry and finance folks, as well as the key to our SPAC team, Ari Edelman (link)), I think a confluence of factors are driving this trend:

  • Renewed confidence in industry fundamentals and prospects, evidenced in the recent run-up in MSO stock prices
  • Those higher stock prices have brought higher multiples (metrics to gauge the value of a company as a multiple of, say, revenue or EBITDA), making a sale more attractive
  • Raising an IPO on a Canadian exchange still remains a challenge (relative to the IPO boom of 2018-19), while the SPAC provides more certainty on closing and pricing
  • New institutional money is coming into the Cannabis market to fund these de-SPAC transactions (at a minimum, for ancillary business deals), and institutional capital understands how SPACs work
  • The investment periods (in which they’re required to get a de-SPAC deal done) on a number of the 2019 vintage (meaning, they were formed in 2019) SPACs are running down, driving sponsors to get deals done, which makes it more attractive for the seller and the investor
  • Everyone loves SPACs these days (link)

I also think this trend will continue for the time being, so long as these fundamentals maintain their momentum. Then again, I’m supposed to have given up on predictions. (link)