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The capital crunch is intensifying, and cash has become king again.

Nobody in the cannabis sector has closed a debt deal in four consecutive weeks, with zero U.S. capital raises so far this year – a multiyear low for the industry.

“We haven’t seen either of these occurrences since before 2017,” a Jan. 25 research note from Viridian Capital Advisors said. “Total capital raises are off to the slowest start since we began tracking the market in 2015.”

January’s dearth of deals so far reaffirms downbeat predictions coming into 2023: Only $5.9 million has closed through the first three weeks of the year compared to $157.2 million last year, according to the firm.

The findings paint an interesting picture for an industry twisted in several directions at once.

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The six largest U.S. MSOs combined accounted for around $5 billion (20%) of cannabis industry revenue in 2021, according to a November report from Viridian. No single player represented even 5% of the total.

“As the industry gets closer to federal legalization, we anticipate a wave of consolidation as companies seek to position themselves to achieve economies of scale in production, marketing, and logistics that are not yet available in the state regulatory regimes,” wrote Frank Colombo, director of data analytics at Viridian.

That includes establishing national brands, distribution systems, and centralized production facilities – all of which require immense capital.

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Around 9,900 small companies with average revenues of around $1.6 million accounted for more than 60% of total cannabis industry sales in 2021. In contrast, 9,100 U.S. craft beer companies represented only 27% of beer revenues.

“As in the beer industry, there will always be thousands of craft cannabis companies, but the share of revenues earned by the largest competitors is likely to double over the next five years,” Colombo added.

International companies are also beginning to move into the North American space with appetites for distressed assets at “very, very attractive valuations at this point,” Richard Carleton, CEO of the Canadian Securities Exchange (CSE), told Green Market Report.

“Again, I expect to see the players with the stronger balance sheets who already are public doing very much the same thing,” he said.

International cannabis operations look to North American exchanges – specifically the CSE – for growth capital as they try to expand their footprints.

Management teams now moving into the space likely see opportunities to do a number of tactical and strategic acquisitions, given the market conditions.

Still, Carleton believes that second- and third-tier operators will fare better in the markets versus the heftier MSOs because of their cheaper valuations.

Jonathan DeCourcey, an analyst at California-based financial research firm BTIG, echoed that sentiment in a Jan. 6 research note, adding that such companies’ fundamentals are in some cases equal or even better than the larger players. He also thinks that looming debt maturities aren’t as concerning as some make to believe, considering year-end refinancing deals.

Cards Spell Consolidation as 2023 Dealmaking off to Slow Start on Green Market Report.