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‘Overwhelming’

Viridian, based in New York, was founded in 2014 and calls itself the first licensed investment bank for cannabis. The firm says it’s turning down about 95 per cent of calls it gets these days as family offices, hedge funds and wealthy investors look to invest in the U.S. cannabis industry.

“It’s overwhelming — we’re drowning in deal flow,” said Scott Greiper, Viridian’s president and founder.

The largest U.S. banks have started to dip their toes into the marijuana industry, with some now offering equity research on Canadian companies. Goldman Sachs and Bank of America drew attention last year by participating when Constellation Brands, the maker of Modelo and Corona, put US$4 billion into Canada’s Canopy Growth Corp.

It's overwhelming — we're drowning in deal flow Scott Greiper, Viridian's president and founder

But for the most part, Canadian banks have dominated, with Canaccord Genuity and GMP Securities being the two largest players. Canaccord was recently listed as an adviser for Grassroots, which was acquired by the most-valuable U.S. marijuana company, Curaleaf Holdings Inc., in a deal worth about US$875 million.

Booming Market

Legal marijuana sales surged north of US$10 billion in the U.S. last year, and there are now 11 states where weed is allowed for adults. The market is estimated to be larger in California alone than in Canada. Still, federal prohibition means a state-by-state patchwork of regulations governs the industry, making it tricky to formally value underlying assets, like licenses for retail stores or growing operations.

Additionally, businesses now operating in the legal weed economy sometimes have roots in the black market, making them difficult acquisition targets. In that context, the arrival of more professional bankers, as deals and consolidation increase, is welcome news, according to Christopher Male, managing director of Revel Holdings, a Florida-based cannabis fund.

“It’s moving very fast,” he said. “Everybody wants in now.”

Bloomberg.com