Special Purpose Acquisition Companies (SPACS) have had increased activity in the cannabis and hemp/CBD industries over the past year. Presently, these “blank check companies” have raised more than $3 billion. Investors and operators interested in partaking in these vehicles and participating in the public market should be aware of which SPACs will be looking to acquire participants in the cannabis and hemp/CBD industries and the tools they will need to navigate these somewhat rocky waters.
Understanding SPACs and the Cannabis Industry
While SPACs are not new to the public market, they have recently taken on some novelty by targeting businesses in the cannabis and hemp/CBD industries, and ancillary businesses to those industries.
Given the nature of these corporate vehicles, there is often limited information on the SPACs’ targeting businesses, as by design these types of companies do not have a firm business purpose.
SPACs typically have 18-to-24 months to purchase private companies or return money back to their investors. To the extent a hemp/CBD- specific SPAC or a SPAC that has expressed intentions of acquiring a cannabis operator, but has not yet combined with one, the SPAC may register on a U.S. exchange – and many of them have or have indicated expectations to. Also, many U.S. stock exchanges have demonstrated signs of being more accepting of businesses that are not plant-touching, but instead ancillary to the cannabis and/or hemp/CBD industries (ie., production and retail of cannabis packaging).
However, once a SPAC purchases a plant-touching company (such as a marijuana cultivator, processor, or dispensary), the SPAC will likely delist on the U.S. exchange, due to the federal illegality of marijuana in the U.S., and then relist on a Canadian exchange.
Major Players to Watch
In July 2020, Forbes has listed several top cannabis SPACs, with information on their fund size,