Silver Spike Capital, a cannabis investment firm, is using creative financial structures to help solve a big problem for the industry: a lack of cash.
Due to the federal prohibition on marijuana, cannabis companies can’t just take out bank loans or issue bonds. That’s given rise to creative financing: Many lenders in the cannabis space, for example, specialize in loans secured by real estate.
But Silver Spike Chief Executive Officer Scott Gordon, with more than 30 years in asset management and investing under his belt, has taken a different approach. Silver Spike has so far spawned three special purpose acquisition companies — one of which took cannabis technology platform Weedmaps public in 2021.
Earlier this month, Silver Spike also announced that its business development company co-led a $170 million loan to Shryne Group Inc., which owns California-based Stiiizy, one of the top U.S. cannabis brands. It’s an interesting move in an industry where the lack of interstate transport makes it hard to gain recognition as a national brand.
Gordon also co-founded Egg Rock Holdings, parent company of the Papa & Barkley brand of cannabis and CBD products. And while concerns are rising about market saturation and competition in California, he sees this as a proving ground for nascent brands.
Gordon spoke to me about his view of where cannabis markets and brands are headed.
For a while it was getting cheaper for cannabis companies to take out loans. But equity values have declined quite a bit. What’s the environment like right now?
It’s ebbing and flowing. You had a number of deals announced at the end of last year for public multistate operators where the rates were around 8% to 13%. But that was a different environment. Today it’s 200 to 300 basis points wider. It’s hard to say. These aren’t publicly traded bonds, it’s all behind the scenes, it’s all interpretive.
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