Marijuana-focused private equity firm, Privateer Holdings has raised $40 million in convertible bonds just days before the U.S. election, during which nine U.S. states, including California will vote on legalization.
Cannabis-based investment firms like Seattle-based Privateer have been working to build up war chests prior to a vote that could legalize marijuana in nearly an additional 20 percent of U.S. states. However, investors have been reticent without the results of the vote – which makes determining a valuation for Privateer difficult.
“Most of the potential lead investors wanted to wait until after next Tuesday to invest,” Chief Executive Brendan Kennedy said in an interview reports Reuters.
The move to raise funds via convertible debt was a way to secure investments without a value determination at this time.
Huge Potential
During its first full year of legal medical and recreational marijuana sales, the state of Colorado saw sales of more than $700 million in 2014.
Tagged as a growth sector, the marijuana industry as a whole has been growing at almost 34 percent per year for the past five years and is expected by IBISWorld to reach a value of $13.4 billion by 2020.
There are now 5,000 retail outlets selling legal medical or recreational marijuana across the U.S., generating $3.6 billion in revenue this year alone. This number of stores is expected to climb by 20 percent through 2020, when the number of U.S. stores is projected to reach 12,000.
With numbers such as these, the industry is gaining traction with serious investors including Mircrosoft, Scotts Miracle-Gro, and Australian gold explorer, International Goldfields Ltd. The ArcView Investor Network has also stated that it has worked to connect more than $40 million of investments across 53 cannabis-focused startups.
Targeting $100 Million
Reuters reports that Privateer is aiming to raise an additional $60 million for a targeted goal of $100 million including the notes. When the round closes, Privateer states it will set a valuation and convertible note holders will receive a 15 percent discount upon receiving equity in the company.
Strategically, Privateer says it plans to invest more than half of the round in companies outside the U.S., with a focus on Canada and possibly Australia which legalized medical marijuana this past February.
If a federal law passes in the U.S. legalizing the medical and recreational use of marijuana, financial services firm, Reuters reports that Cowen and Co. forecasts that the U.S. market will grow to $50 billion in sales by 2020 – up from $6 billion today.