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Debt financing eclipses equity in US marijuana cultivation and retail fundings

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Chart showing the shift to debt financing in the cannabis industry

Capital raises in the U.S. marijuana industry are down nearly 65% this year versus 2021, but lower stock prices and more creditworthy cannabis companies mean debt financing is now the preferred method to raise funds for the first time in years.

Equity financing had dominated cannabis capital raises since at least 2018.

But so far this year, debt funding has dominated, according to data collected by New York-based cannabis capital, M&A and strategic advisory firm Viridian Capital Advisors.

To be sure, debt financing in the U.S. marijuana industry is down by 39.9% compared to last year from January to October, according to Viridian data.

But year-to-date, debt now makes up 93% of capital raised by U.S. cultivation and retail companies and 55.7% in the U.S. industry overall.

The shift comes as more companies have spruced up their balance sheets and are better positioned to repay loans.

Looking ahead, debt financing will continue to be the main means of raising capital until economic conditions change, according to analysts – think lower interest rates, higher stock prices, federal marijuana reform or some combination.

And despite this year’s shift in funding patterns, securing debt financing isn’t easy.

After bootstrapping ExtractionTek Stainless since 2011, Chief Marketing Officer Sean Winfield and his team at the Colorado-based company are at a crossroads.

The past two years of the COVID-19 pandemic have been tough, highlighted by supply-chain difficulties as well as added health and safety protocols at the extraction machinery company’s 30,000 square-foot manufacturing facility in Denver.

Now, ExtractionTek and its marijuana industry partners are battling lower cannabis prices at a time when the general economy is confronting raging inflation.

With expansion opportunities in emerging domestic markets and in Europe as well as his company’s plans to expand its training facility, Winfield is evaluating how best to secure investment of approximately $5 million for operating and growth capital.

What about debt financing?

Winfield winces at the word “debt” – something ExtractionTek has avoided taking on thus far.

“We don’t understand the implications of debt financing, necessarily,” Winfield said. “We need some further education, to find the right partners to really give us options that make sense and to educate us.”

Rising interest rates 

Most debt-financing deals are made between private companies.

But two recent deals made by public companies demonstrate some of the intricacies involved, most notably how interest rates and other terms are pegged to overall interest rates as well as risk spreads – such as the ICE BofA US High Yield Index Option-Adjusted Spread.

(The spread measures the difference between an index of corporate bonds and rates on government-backed U.S. Treasury securities.)

Which is to say that debt financing is getting more expensive.

Earlier this month, the Maryland and New Jersey subsidiaries of Toronto-headquartered cannabis operator TerrAscend – which has operations in five states and Canada – closed a nondilutive, senior secured loan for $45.5 million from Pelorus Equity Group.

Pelorus lends against the hard and soft costs of the real estate owned by a company, said Travis Goad, the financier’s managing partner.

“We’re also collateralized by the operating company and a license as well, so that if something were to ever go wrong or there was an issue, we could sell a functioning cannabis facility or lease it to somebody else,” he explained.

“So we spend a lot of time underwriting on a per-square-foot basis what they should be able to produce in this market.”

The $45.5 million comes at a 12.77% floating interest rate, which Frank Colombo, director of data analytics at Viridian, predicts will likely appear in more cannabis debt-financing deals to come.

He cited the Federal Reserve’s recent interest rate increases to fight inflation as well as expectations of further rates hikes.

“Is that potentially risky for cannabis companies? Yes,” Colombo said. “Because it’s 12.77% now; by the time the Fed finishes raising rates, what will it be?

“It could be another 100 basis points up from that.”

Equity-linked debt financing on the rise

In August, California-based Lowell Farms raised a total of $6.4 million through two rounds of debt financing to be used for “working capital purposes, automation, investments and expansion into new markets,” according to a news release announcing the deal.

“We are grateful for investor support as a testimony to the strategy we have employed to differentiate ourselves,” Lowell Farms Chair George Allen said in a statement.

“This financing allows Lowell to bring capabilities to market that have been in development for years.”

Lowell secured a 5.5% interest rate, but the debentures are convertible and include exercisable warrants for shares of its subsidiary Indus Holding Co. at $0.2613 and a 42-month term from the date of issuance.

According to Viridian data, equity-linked debt deals dropped off earlier this year but have bounced back to account for about 50% of debt-financing deals in the U.S.

The difference this time around is that equity-linked deals are more expensive.

In 2021, larger multistate operators with good credit could finance debt for around 8%, according to Viridian data. In the case of Lowell, Colombo estimates the cost at around 30%.

“I think Lowell had a liquidity problem, and they needed to raise cash,” Colombo said. “It’s likely not a financing of opportunity but a financing of need.”

Lowell did not immediately return an MJBizDaily request for comment.

Private deals

Michigan-based retailer Noxx closed a $15 million debt-financing deal with Altmore Capital in August. The terms weren’t disclosed.

Noxx CEO Tommy Nafso said he pitched to about a half-dozen potential capital partners and received an array of offers before striking a deal with Altmore.

Nafso said he focused on clearly articulating:

  • The market opportunities for the three retail licenses the company holds in Grand Rapids.
  • The executive team’s experience working at companies such as Amazon, Ralph Lauren and Domino’s Pizza.
  • Noxx’s customer-focused goals, future expansion plans and how well-positioned the company would be should market conditions change.

Since securing the funding, Noxx has opened its first store while investing in e-commerce, delivery services and ensuring the store design was as close to the renderings as possible.

“It feels like you’re in a different universe in our store,” Nafso gushed.

Last week, Noxx announced its latest phase of its growth plan: a partnership with Cookies, the California-based cannabis brand, to open a 3,000 square-foot Cookies location in Grand Rapids.

Watch for prepayment provisions

Colombo anticipates debt financing to continue to be the main means of raising capital until economic conditions change, with lower interest rates, stronger markets, legislative changes or a combination of the above.

But he warns borrowers to look beyond interest rates and closely at prepayment provisions.

If banking reform legislation passes – which would boost marijuana stock prices – or interest rates decrease, agreeing to a provision requiring a premium on a prepayment or a minimum number of earned interest could mean losing out on less expensive borrowing conditions in the future.

“That’s one of the reasons why debt is not as down as much (as equity),” Colombo said.

“If you have to raise money because you have a liquidity issue or maybe you have a really great opportunity that you have to come up with the cash for, the only way you’re going to really want to do it is with debt.”

Source: https://mjbizdaily.com/debt-financing-eclipses-equity-in-us-cannabis-cultivation-and-retail-fundings/

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Jio’s 1,600-Satellite LEO Constellation Gets Technical Green Light

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Reliance Jio has crossed a significant milestone in its space connectivity ambitions after its proposal to deploy a Low Earth Orbit (LEO) satellite constellation of around 1,600 satellites received a positive technical assessment from the Indian National Space Promotion and Authorisation Centre (IN-SPACe).

The evaluation, conducted jointly by IN-SPACe, the Indian Space Research Organisation (ISRO), and the Wireless Planning and Coordination (WPC) wing of the Department of Telecommunications, reportedly concluded that Jio’s proposed system meets the required technical standards and is comparable to leading global satellite broadband networks.

India’s Indigenous LEO Satellite Vision

Under the proposal, Reliance Jio plans to deploy between 1,600 and 1,650 satellites in Low Earth Orbit at an altitude of around 650 kilometres.

The planned constellation is expected to provide high-speed satellite connectivity across India, with approximately 32 satellites visible from any location at a given time. The company aims to roll out the network within the next two to three years, subject to regulatory approvals.

According to industry estimates, the satellite system could deliver 4.5 to 5 terabits per second (Tbps) of total data capacity, making it one of the largest satellite broadband projects proposed in India.

The project is expected to require an investment of $10–15 billion (approximately ₹95,000 crore to ₹1.42 lakh crore), reflecting the scale of infrastructure needed for satellite manufacturing, launches, ground stations, and user terminals.

Regulatory Process Moves Forward

Following the successful technical review, the proposal is expected to move into the next phase of regulatory approvals.

The government may now assist Jio in securing orbital slots, coordinating spectrum usage, and filing applications with the International Telecommunication Union (ITU), the global body responsible for managing satellite orbit and frequency allocations.

Obtaining orbital rights remains a critical step, as Low Earth Orbit has become increasingly competitive due to the growing number of satellite broadband projects being planned worldwide.

Officials also indicated that the proposed satellite architecture has been designed to coexist with future Indian LEO constellations, allowing multiple domestic operators to share orbital resources efficiently.

Broadband, Mobile Connectivity, and Strategic Applications

Jio plans to use the satellite network to provide a range of communication services, including satellite broadband, mobile backhaul, enterprise connectivity, and direct-to-device (D2D) satellite communication, particularly in remote and underserved regions where conventional telecom infrastructure is limited.

The company also intends to establish 20 to 22 ground stations across India to support network operations.

Apart from commercial telecommunications, officials have highlighted the project’s potential strategic importance. A domestically developed satellite constellation could strengthen India’s communication infrastructure, reduce dependence on foreign satellite operators, and support national security requirements.

Reports suggest preliminary discussions are underway regarding the possibility of integrating defence-related payloads into some satellites, enabling both civilian and strategic use.

Major Step for India’s Space and Telecom Sectors

Industry analysts view the technical clearance as an important milestone in India’s expanding private space ecosystem. If Jio secures the remaining regulatory approvals and international orbital clearances, the project could become the country’s first large-scale indigenous LEO satellite broadband network.

The initiative also aligns with India’s broader efforts to expand digital connectivity while strengthening its presence in the global satellite communications market.

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Alleged Crores Pharma Scam Mastermind Arrested from Surat

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After evading law enforcement for nearly 13 years, an accused linked to a large-scale pharmaceutical fraud case has been arrested by Delhi Police from Surat, Gujarat. The suspect is alleged to have orchestrated a series of financial scams involving fake identities, forged documents, and dishonoured cheques used to procure high-value pharmaceutical raw materials.

Authorities say the accused, identified as Himmat Singh Lodha, is believed to have defrauded multiple pharmaceutical companies in Delhi of goods worth approximately ₹98 lakh before disappearing and remaining underground for years.

Fake Business Deals and Dishonoured Cheques Used in Fraud

Investigators claim the accused posed as a legitimate pharmaceutical trader and placed bulk orders for expensive drug ingredients, offering post-dated cheques as payment security.

In one documented case from 2013, he allegedly obtained around 550 kilograms of Gliclazide, a diabetes-related pharmaceutical ingredient, valued at over ₹26 lakh. When suppliers attempted to encash the cheques, they were reportedly returned with the remark “account closed.”

Following the transaction, the accused allegedly vacated his office and rented residence and disappeared without settling payments. He was later declared a proclaimed offender in 2016 after repeatedly failing to appear before court proceedings. Authorities had also issued a reward for information leading to his arrest.

Multiple Identities and Repeated Fraud Pattern

Police investigations further link the accused to another cheating case dating back to 2012, where he allegedly used a fake identity, “Kailash Jain,” to obtain a large consignment of Ambroxol HCL, a pharmaceutical compound used in cough medications. The value of that consignment was estimated at around ₹72 lakh.

Officials believe the accused followed a consistent modus operandi—posing as a credible businessman, securing high-value goods on deferred payment terms, and then disappearing after delivery while shutting down business operations.

Investigators suspect that forged business records, fake company credentials, and fabricated financial histories were used to build trust with suppliers and gain access to expensive raw materials.

Multi-State Surveillance Leads to Arrest in Surat

A special Crime Branch team tracked the accused through coordinated surveillance efforts across multiple cities, including Mumbai, Ahmedabad, and Surat. After nearly a month of technical monitoring and intelligence gathering, officials located and arrested him from a residential area in Surat.

Authorities also revealed that the accused had been involved in property-related activities while staying under the radar to avoid detection.

Growing Threat of Corporate Identity Fraud

The case highlights a rising trend of organised financial fraud targeting industries that rely heavily on trust-based transactions and deferred payments. Experts note that criminals increasingly exploit gaps in corporate verification systems by using fake GST registrations, temporary offices, and forged documentation to appear legitimate.

Cybercrime and financial fraud specialists warn that such schemes are becoming more complex with the widespread availability of digital business tools, making it easier to create convincing but fraudulent corporate identities.

Experts Urge Stronger Due Diligence in High-Value Transactions

Experts, including former IPS officer and cybercrime specialist Prof. Triveni Singh, emphasize the need for stricter verification procedures in commercial dealings. He noted that relying solely on paperwork or digital business profiles can expose companies to significant financial risk.

Authorities and industry experts recommend physical verification of business operations, bank account validation, and detailed background checks before engaging in high-value or deferred-payment transactions—particularly in sectors like pharmaceuticals, where single consignments can involve transactions worth crores.

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EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices

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A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.

Investigation Under Digital Markets Act Gains Momentum

The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.

Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.

Industry Groups Demand Swift Action

Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.

Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.

In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.

Google Denies Allegations

Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.

However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.

Potential Billion-Euro Penalties

If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.

Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.

Wider Implications for Big Tech

The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.

A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.

As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.

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