Cultivation & Retail, historically the most significant sector for equity financing, accounted for only $14M (1.6%) of equity raised YTD in 2022 compared to $1.9B (52%) in 2021. We expect this trend to continue for several reasons:
The MSOs have been able to use equity in acquisitions, one of their primary needs for new capital.
The Tier 1 MSOs have strong cash positions and are expected to be free cash flow positive in 2022 and 2023, eliminating any pressing need to issue equity in a down market.
Greater availability and better pricing of debt is a further restraining factor.
Investment/M&A, which is chiefly composed of SPAC IPOS, have also fallen deeply out of favor. They made up only 9.9% of 2022 YTD compared to 16.1 % in 2021 and are likely to represent a lower percentage in future periods due to Increased SEC scrutiny and poor performance of de-SPAC’d stocks.