Many cannabis companies are finding it difficult to raise capital, and it can be challenging for marijuana producers to obtain financing at attractive rates. This is particularly true for smaller growers.
Analysts at Stifel Financial recently highlighted these challenges in a research note. Stifel described how Flowr Corp. (NASDAQOTH:FLWPF), a $275 million Canadian marijuana producer, was forced to use a bought-deal transactionto finance its acquisition of Portugal-based grower Holigen — at a price approximately 30% below where its stock was trading before the deal was announced after it was unable to complete a secondary offering.
In turn, Stifel believes larger producers with sizable cash reserves — namely Canopy Growth (NYSE:CGC) and Cronos Group (NASDAQ:CRON) — will have a powerful competitive advantage over less cash-rich rivals, particularly if rising production levels cause Canada’s cannabis market to become oversupplied in the coming years.
“We highlight the advantage for both Canopy Growth and Cronos Group (C$3.7 billion and C$2.4 billion of cash on hand, respectively) with each company having the cash on hand to execute their business plan and take advantage of any dislocation in the industry,” Stifel said.
All told, Stifel believes investors may be…
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