💰 Who's Making Millions?

The investment banks who are making millions of dollars from cannabis...

Welcome to Four PM — a newsletter that provides cannabis industry news & insights from cannabis industry leaders.

In Today’s Issue 💬

→ The Banks Cashing In On Cannabis. 💰

→ The $2.1 Billion Dollar Cannabis Deal. ✔️

→ Kevin Durant’s Cannabis Content. 🏀

The Banks Making Millions

Who’s making millions from the consolidation occurring in cannabis?

As several companies bid to become the largest cannabis company in North America by acquiring their competitors and raising hundreds of millions of dollars — investment bankers are making millions.

Per Insider, Wall Street banks have pulled in $577 million USD in fees from cannabis deals since 2017.

The How…

Every time a company wants to acquire a competitor or raise capital — they enlist the help of bankers.

Compensation can amount anywhere between 3% to 10% of the total capital raised or the value of the M&A deal.

With several billion-dollar deals in recent times — bankers are making millions of dollars each year.

The Who…

There is no shortage of banks seeking to cash in on cannabis with billion-dollar banks such as Goldman Sachs and Jeffries all having entered this race.

Surprisingly one relatively small-sized Canadian company named Canaccord Genuity is currently leading this race, capturing 16% of all fees to date:

  • (1) Canaccord Genuity → $170 million USD.

  • (2) Goldman Sachs → $65 million USD.

  • (3) Eight Capital → $55 million USD.

  • (4) Cowen&Co → $53 million USD.

  • (5) Stifel → $53 million USD.

Additional on this list are BMO Capital Markets, Centerview Partners, Cormark Securities & Jefferies.

All of which have taken home over $30 million USD in fees since 2017.

Looking Forward

There is a high possibility that these millions will look small in comparison to the fees big banks will generate from cannabis in the years to come.

Several banks have been very hesitant to work with cannabis companies as a result of cannabis remaining illegal at a federal level in the U.S.

Additionally, the fact that a Canadian bank currently sits at the top of this list highlights the number of deals that have been struck in Canada since 2017, however, it also highlights just how early the U.S cannabis market is today.

Undoubtedly, this same level of consolidation the Canadian cannabis industry has seen will make its way south of the border, and with the U.S having 10x the population vs Canada we can expect to see even bigger deals.

Our Take

When this same data is gathered in 5 years’ time I will be very surprised if a Canadian bank remains at the top of this list, reflecting the changes we are seeing as more investors focus on the U.S market.

There is a certain amount of irony that during the same period in time every Canadian cannabis company has struggled to generate profits — investment banks are generating hundreds of millions of dollars from cannabis.

The NBA Start Creating Cannabis Content

Basketball player Kevin Durant has signed an exclusive content deal…

Despite earning millions throughout their careers — it’s estimated that upwards of 60% of NBA players will face financial issues less than five years after their retirement.

This number is even higher for professional football players with 78% of NFL players having severe financial issues within just two years of retirement.

Athletes Investing…

More and more athletes every year are deciding to take their financial futures into their own hands by using their influence to invest in top startups.

One such example is basketball star, Kevin Durant.

In 2016 Durrant and his agent Rick Kleiman created Thirty-Five Ventures.

In the time since, they have invested a combined $15 million into 40 ventures — and they are absolutely killing it.

  • → In 2016, they invested $1 million into Postmates and 15x their money when Postmates was acquired by Uber.

  • → In 2017, they invested in Robinhood, and in the time since Robinhood has increased its valuation by over 20X.

  • → In 2018, they invested in Dutchie when they were worth less than $20 million, which is now valued at $1.7 billion USD.

On the back of this successful investment in Dutchie, Durrants firm Thirty-Five Ventures yesterday agreed to a collaborative content partnership with Weedmaps.

The Deal…

The partnership will include creating podcasts and video series that will aim to “deconstruct the negative stereotypes” associated with cannabis and conversations around “the plant’s potential for athlete wellness and recovery.”

The companies will initially collaborate on the production of an original content series said to be coming out in 2022.

According to Durant, the discussion about their next move in the cannabis space had been going on for months now.

“I think it’s kind of limitless what we can cover and what we can talk about.

We as a company, Kevin, myself, our platform, Boardroom, all of us realized that it was important to get into this conversation,” Kleiman (Durant’s agent) said to Forbes.

Weedmaps Vs Dutchie?

This specific deal raises a very interesting question which is why Durrant decided to partner with Weedmaps over his portfolio company Dutchie?

Today, it would be hard to say Dutchie and Weeedmaps are direct competitors as Dutchie primarily focuses on providing cannabis retailers with its e-commerce solution.

That said, Dutchie’s recent acquisition of  GreenBits — a cannabis point of sale software company has now put the company on track to directly compete with Weedmaps.

Dutchie has not ventured into “cannabis media” whereas Weedmaps has continued to make investments in developing cannabis media.

Our Take

We may not see any wildly successful cannabis celebrity brand anytime soon, however, we shouldn't underestimate just how significant an impact these same celebrities can have when it comes to destigmatizing cannabis.

Many NBA players have long said that there is a very high percentage of NBA players who consume cannabis, and credit, where credit is due Kevin Durrant is breaking down some big walls such that we can have these conversations.

Trulieve Gains Approval For Acquisition

A supreme court in Canada has given the go-ahead for Trulieve to acquire Harvest Health & Recreation for $2.1 billion USD.

Founded by Kim Rivers in 2015, Trulieve has made little effort to conceal its ambitions of becoming the largest U.S cannabis company.

Having spent several years working as a lawyer where she specialized in mergers, acquisitions, and securities for large companies — CEO Kim Rivers is no stranger to the world of acquiring companies.

Since 2015 Trulieve has acquired The Healing Corner, PurePenn, Solevo Wellness & Mountaineer Holding, and in May they announced their pursuit of the biggest deal yet — Harvest Health & Recreation.

Gaining Approval…

Despite all of the progress that has been made in recent years — U.S cannabis companies still cannot list on U.S stock exchanges.

Consequently, any U.S cannabis company seeking to go public has little or no choice but to list on the Canadian stock exchange.

As a result of listing their shares on the Canadian stock exchange, companies such as Trulieve require permission from the Canadian courts to complete their acquisition of Harvest Health.

Earlier this week Trulieve announced that it has obtained the final order from the Supreme Court of British Columbia to complete this billion-dollar deal.

The Deal….

Today Trulieve has 83 stores in Florida with 48% market share of medical cannabis in the state, and an additional 7 stores located across the U.S.

By acquiring Harvest Health, Trulieve will gain an additional 30 cannabis retail stores with licenses to open an additional 40 stores.

Once the deal is closed, shareholders of Harvest Health will own 26.7% of Trulieve, with Trulieve shareholders retaining the remaining 73.3%.

Based on the share price of Trulieve when this deal was announced, Harvest Health is valued at $2.1 billion USD.

Our Take

We will continue to see this type of consolidation occur in cannabis for many years to come.

For companies that have made very clear their ambitions of becoming the largest cannabis company in the U.S — they will continue to acquire competitors to accomplish this goal.

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