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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/

Business

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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AI & Technology

Amazon Faces Potential Criminal Trial in Italy Over €1.2 Billion Tax Evasion Allegations

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Milan: U.S. tech giant Amazon is facing the prospect of a major legal showdown in Italy, after prosecutors in Milan formally requested a court to move forward with criminal proceedings over alleged tax evasion totaling approximately ₹12,500 crore (€1.2 billion).

The case targets Amazon’s European division along with four senior executives, marking one of the most significant tax-related investigations involving a global e-commerce platform in Europe.

Trial Push Despite Multi-Million Euro Settlement

The move comes even after Amazon reached a financial settlement with Italian tax authorities in December, agreeing to pay around ₹5,500 crore (€527 million), including interest, to resolve part of the dispute.

Typically, such settlements lead to the closure of criminal investigations. However, Milan prosecutors have opted to proceed, signaling a tougher stance on alleged corporate tax violations.

A preliminary hearing is expected in the coming months, where a judge will decide whether to formally indict the company and its executives or dismiss the case.

Allegations of VAT Evasion Through Marketplace Sellers

At the center of the investigation are claims that Amazon’s platform enabled non-European Union sellers to avoid paying value-added tax (VAT) on goods sold to Italian consumers between 2019 and 2021.

Prosecutors allege that the company’s marketplace structure allowed thousands of foreign vendors—many reportedly based in China—to operate without fully disclosing their identities or tax obligations. This, authorities argue, led to substantial VAT losses for the Italian government.

Under Italian law, online platforms facilitating sales can be held partially liable if third-party sellers fail to comply with tax requirements, a key point in the prosecution’s case.

Italian Government Named as Affected Party

In their filing, prosecutors identified Italy’s Economy Ministry as the injured party, citing significant financial damage resulting from the alleged tax evasion.

Legal experts say the outcome of the case could have wide-ranging implications across the European Union, where VAT systems are harmonized and similar compliance rules apply to digital marketplaces.

Multiple Investigations Add to Pressure

The VAT probe is just one of several legal challenges facing Amazon in Italy. The European Public Prosecutor’s Office is reportedly examining additional tax-related issues covering more recent years.

Meanwhile, Milan authorities are pursuing separate investigations into alleged customs fraud linked to imports from China and whether Amazon maintained an undeclared “permanent establishment” in Italy—potentially exposing it to higher tax liabilities.

In a separate regulatory action, Italy’s data protection authority recently ordered an Amazon unit to stop using personal data from over 1,800 employees at a warehouse near Rome.

Amazon Denies Allegations

Amazon has consistently denied wrongdoing and indicated it will strongly contest the allegations in court if the case proceeds. The company has also warned that prolonged legal uncertainty could impact investor confidence and Italy’s appeal as a destination for international business.

Broader Impact on Europe’s Digital Economy

If the case moves to trial, it could become a landmark moment for the regulation of global e-commerce platforms in Europe. Governments across the region are increasingly scrutinizing how digital marketplaces handle tax compliance, especially in cross-border transactions.

With online retail continuing to expand, regulators are under mounting pressure to ensure that multinational platforms and third-party sellers adhere to the same tax rules as traditional businesses.

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Aviation

IndiGo Crisis Exposes Risks of Monopoly: What If Telecom or E-commerce Collapses Next?

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Airports across India witnessed scenes of distress and confusion as thousands of passengers were stranded due to IndiGo’s massive flight disruptions. Families with medical emergencies, funerals, and personal crises were left helpless as the airline cancelled hundreds of flights without adequate communication or support.

Passengers described desperate situations — a mother pleading for sanitary pads for her daughter, a woman unable to transport her husband’s coffin, and others stranded while trying to reach family funerals or hospitals. “It was like a lockdown at the airport,” one passenger said, describing the panic that unfolded as IndiGo’s mismanagement crippled operations nationwide.

Root Cause: IndiGo’s Market Monopoly

The turmoil, industry experts argue, stems from IndiGo’s monopolistic control over India’s domestic aviation market. The airline operates nearly 2,100 flights daily and holds around 60% market share — meaning every second plane flying within India belongs to IndiGo.

This dominance has given the company unparalleled influence. When IndiGo falters, the entire aviation system suffers. Passengers are left with few alternatives, as other airlines lack capacity to absorb stranded travellers. The result: skyrocketing ticket prices, chaos at terminals, and total dependence on a single private operator.

Aviation pioneer Captain G.R. Gopinath, founder of Air Deccan, criticised the government’s inaction, noting that on some routes, IndiGo’s economy fares surged to ₹1 lakh. He compared the situation to a hostage crisis, writing that the airline “held the system ransom” and forced regulators to defer new safety rules meant to protect pilots and passengers.

Government Intervention and Regulatory Weakness

The crisis erupted after IndiGo failed to comply with the Flight Duty Time Limitations (FDTL) — rules introduced by the DGCA in January 2024 requiring adequate rest for pilots. Despite having nearly two years to adapt, IndiGo blamed the rule for operational disruptions, citing a shortage of pilots.

Under mounting public pressure, the government stepped in, temporarily relaxing FDTL norms and capping airfare hikes. Officials claimed the move was to protect passengers, but analysts say it exposed the state’s vulnerability to corporate monopolies. “The government had no option but to yield,” said one aviation policy expert, pointing out that ignoring safety regulations for short-term relief could have long-term consequences.

The crisis also rekindled memories of the June 2025 Air India crash near London, which claimed over 240 lives. Experts warn that compromising pilot rest and safety standards to maintain flight schedules could risk another tragedy.

If Telecom Giants Fail: A National Paralysis

The article raises a troubling question — what if a similar crisis struck the telecom sector, where Jio and Airtel together control nearly 80% of subscribers and serve over 780 million users?

If both networks failed simultaneously, the repercussions would be catastrophic. Internet shutdowns would halt UPI transactions, online banking, OTP verifications, video calls, OTT streaming, and emergency communications. Critical services such as airports, hospitals, stock exchanges, and small businesses — many of which rely on WhatsApp and digital payments — would come to a standstill.

In essence, a telecom breakdown could paralyse India’s digital economy, exposing the nation’s dependence on a duopoly.

E-commerce Monopoly: Another Fragile Ecosystem

The same risk looms over the e-commerce sector, where Amazon and Flipkart dominate nearly 80% of the market. A disruption similar to IndiGo’s could cripple daily life — halting delivery of groceries, medicines, and essential goods, freezing refunds and customer support, and leaving small sellers without platforms to trade.

Local retailers, freed from competition, might exploit shortages by inflating prices. Such a scenario underscores the perils of market centralisation in sectors critical to everyday living.

A Wake-Up Call for Regulators

The IndiGo crisis, analysts say, is a warning shot for policymakers and regulators. A single company’s operational failure exposed systemic weaknesses in India’s infrastructure and consumer protection mechanisms.

As the aviation regulator DGCA investigates and IndiGo works to restore normalcy, the broader lesson remains clear: unchecked monopoly power in any essential service — whether air travel, telecom, or e-commerce — poses a direct threat to economic stability and citizen welfare.

Without stronger competition laws, redundancy frameworks, and regulatory oversight, India risks repeating this crisis across multiple sectors — each time with millions of citizens paying the price.

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