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Cannabis & Psychedelics

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Fundamentals

Size Analysis: In this quarter, we observed a total of 157 transactions, amounting to a combined value of $5.24 billion. Specifically, 144 of these transactions, totaling $5.1 billion, were related to the cannabis industry, while the remaining 13 transactions accounted for $142.61 million and were associated with the psychedelic sector. It's worth noting that there was a decline in the number of transactions compared to the previous quarter (Q4 2022), with 11 fewer transactions recorded in Q1 2023. However, despite this reduction in transaction volume, the overall total value of these transactions increased significantly by $2.4 billion. This indicates that even though there were fewer deals, they were of higher value, which could be indicative of shifting trends or opportunities in these sectors.

Public Market Dynamics: The cannabis and psychedelics sector exhibited a reported underperformance of -52.65% when compared to the SPX Index. Despite the SPX Index categorizing the industry as underperforming, it's important to note that it did experience a positive upswing of 3.07% when compared to the preceding quarter. This suggests that while the sector may be currently lagging behind the broader market, there are signs of improvement in recent performance.

Transaction Trends: Overall, we observed a decrease in the number of transactions compared to the fourth quarter of 2022. Specifically, there were a total of 29 transactions during the period under review. It's noteworthy that the largest merger and acquisition (M&A) transaction in this quarter amounted to $26 million for complete control. In contrast, during the preceding quarter, the largest M&A deal reached a substantial $5.2 billion for full control. This shift in the magnitude of M&A transactions suggests a notable change in the market dynamics between the two quarters.

Dispersion Insights: Like past quarters, North America continues to be the primary geographic region where most transactions have taken place. Out of the total of 29 transactions observed, 24 occurred in North America, 1 in Oceania, 1 in Latin America, and 3 in Africa. This geographic distribution of transactions provides insights into the regional prominence of these business activities.

Methodology

We screened CapitalIQ using its industry classification and Business Description. The transactions were filtered by accounted date within the last 3 years. Companies were filtered by having a public company type. The main industry selected was "Healthcare". The keywords "dispensar*", "cannabi*", "marijuana", "hemp" and "psychedeli*" were used to screen the database. Since this niche industry is recent and doesn't have its own categories/sectors on CapitalIQ, Spaulding Financial LLC developped its own code to determine our categories and sectors, based on hundreds of criteria. Contact us for more information.

THIS REPORT IS NOT TO BE USED OR CONSIDERED UNDER ANY CIRCUMSTANCE BY ANYONE AS INVESTMENT ADVICE

This research report is for informational and discussion purposes only. Information presented here is not investment advice of any kind to any person and does not constitute a recommendation as to the purchase or sale of any interests or as to any other course of action. General, financial, and statistical information concerning the details of this report and related industry are from sources Spaulding Financial believes to be reliable.

Spaulding Financial has accurately reflected such information in this research report; however, Spaulding Financial makes no representation as to the sources’ accuracy or completeness and has accepted this information without further verification. Neither all nor any part of the content of this report may be conveyed to the public through advertising, public relations, news, sales, mail, direct transmittal, or other media without the prior written consent of Spaulding Financial. Spaulding Financial ’s research is as of the date reported herein.

Spaulding Financial has no affiliation with any of the companies comprising the industry used as a basis for research in this report, nor does Spaulding Financial hold any investments in the companies listed herein. The content of this report may be used, in part, as a basis for any work that Spaulding Financial performs for you in the future at the sole discretion of Spaulding Financial. All data is from Capital IQ database.

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