Nov 5, 2019 - Economy

Cannabis companies could be facing cash crisis

Illustration of a marijuana plant with dollars for leaves

Illustration: Sarah Grillo/Axios

Marijuana companies may be in serious trouble, as their declining stock prices are putting the cash-reliant businesses in a bind.

Why it matters: "Dealmaking is already slowing, while debt is becoming scarce and more expensive," writes the Wall Street Journal.

  • "Large banks won’t lend to them while the drug remains federally illegal in the U.S., so pot businesses rely heavily on issuing new shares to fund their deals and expansion plans."

The big picture: Those expansion plans are being put on hold these days, as capital is drying up quickly.

  • "The amount of capital raised in the cannabis industry during the week ending October 25 plummeted to $27 million from $708 million in the same period of 2018, data from Viridian Capital Advisors shows," per the Wall Street Journal.
  • "And deals are beginning to fall through: MedMen Enterprises pulled plans for an all-stock purchase of PharmaCann in October," notes the Journal.

Go deeper: Welcome to Marijuana 2.0

Go deeper