Debt dominates cannabis revenue rises as equity deals expire

Once the star of rapid growth and a flurry of investment, the cannabis industry is now struggling with the constant need for capital.

It's good news for some lenders, but for small to mid-sized users looking to raise capital to stay afloat or enter new or expanding markets like New York and Ohio, the answer is increasingly credit.

After peaking in 2021 with as much as $500 million in capital and investment, the industry has transitioned from a growth phase to a sell-off market characterized by declining prices and less organic growth, said Scott Greiper, founder and CEO of New York-based investment bank and data firm Viridian Capital Advisors.

“If companies don't have organic growth, they get growth,” he said.

This trend has been seen among many regional employers, who have long relied on M&A as a key strategy to expand their footprint. As new licenses become increasingly scarce, MSOs are doubling down on purchases to offset slow natural growth.

This change reflects the changing dynamics of the cannabis industry, where regulatory barriers and market saturation are forcing operators to consolidate rather than grow organically. As competition intensifies and opportunities to enter new markets diminish, strategic acquisitions have become critical to maintaining growth and market share.

Can debt financing save the industry?

Debt financing is the lifeblood of the $32 billion legal cannabis industry, accounting for an estimated 94.8% of all funds raised by licensed US operators by 2025, according to the Viridian Cannabis Deal Tracker.

While large MSOs are very successful, small and medium-sized operators often struggle to find funding.

Much of the recent debt financing has been aimed at refinancing existing debt, rather than funding new growth.

The “amend and extend” strategy is becoming more common as companies facing maturing debt negotiate credit terms instead of defaulting, Greiper said.

Of the top 10 raises in 2025, nine were through debt financing, with only ATAI Life Sciences making an equity deal at $150 million.

Raised bills include:

• Cresco Labs, $325 million
• Cannabis Co. Holdings, $270 million
• Vireo Growth Inc., $120 million
• Trulieve Cannabis, $100 million
• Chicago Atlantic BDC, $100 million
• TerrAscend Corp., $79 million
• Glass House Brands, $77.5 million
• Curaleaf Holdings, $60 million

Curaleaf and Jushi are the only significant investments yet to be finalized in 2026, according to the report.

In some cases, lenders have found creative solutions such as Article 9 foreclosures, which allow companies to continue core operations while getting consumers to pay their notes. Last April, California-based Gold Flora announced it would liquidate its assets after mounting financial losses and operational challenges, while MSO Ayr Wellness said last July it would sell its assets.

“If you're a lender and your client doesn't generate enough cash to operate or pay off the note, you have two options: You can foreclose and take over the company – they don't want the company – or you can find a buyer to buy your company and pay off your note,” Greiper said.

“That's becoming the norm now. There's no way out, so you have to be smart.”

Despite these efforts, the cost of debt has risen sharply.

Large private MSOs can get financing at rates ranging from 9% to 11%, while smaller private companies face rates as high as 23%.

The difference reflects a growing divide between industry leaders who are capitalizing well and smaller players who are struggling to stay afloat.

What is the way forward amid regulatory uncertainty?

Much of the growth of the cannabis industry remains dependent on regulatory change, which is a critical position in any industry, although Vireo appears to be the exception after a strong buyout over the past two years.

Hopes for marijuana to be decriminalized again rose in the third quarter of 2024, when the Biden administration scheduled a hearing before a Drug Enforcement Administration judge.

But the lack of progress since then has sent stock prices plummeting and equity issuance to a halt. Even President Donald Trump's December 18th executive order directing Attorney General Pam Bondi to move forward with marijuana decriminalization didn't slow it down, as MSOs' stock prices spiked just before the White House announcement and rallied afterward.

While the completion of restructuring could provide a short-term boost to marijuana stock prices, the influx of institutional capital will require broader banking reforms, such as the SAFER Act, according to a Viridian report.

Despite regulatory clarification, M&A activity is expected to continue to focus on state-level consolidation in markets such as Florida, Ohio, Missouri and Michigan.

However, public companies face challenges to catch up with smaller competitors due to valuation gaps.

Global opportunities and emerging markets

As the American market matures, some companies are focusing on opportunities abroad, especially in Europe, Greiper said.

The European cannabis market, reflecting the growth of the US market in early 2018, is attracting investment in medical cannabis and early stage buildings.

Companies like Curaleaf have been particularly aggressive in pursuing European expansion, looking for growth opportunities outside the saturated US market, Greiper said.

A tired industry is looking for solutions

Many cannabis users are tired of the industry's challenges. From variable tax rates to shrinking brands and ongoing regulatory changes, the battle to stay competitive is on.

Fatigue is driving many companies to seek exits, even at reduced rates and fewer all-cash offerings.

Despite the challenges, the cannabis industry remains on an upward trajectory, albeit slowly. The sector's long-term growth potential depends on regulatory changes, new financing solutions and strategic M&A activity.

“Consumers need to leverage to supplement organic growth,” Greiper said. “The sellers want to get out. They are not really worried. They are tired of fighting a tough battle.”

Margaret Jackson can be reached at [email protected].