A $1.9 Billion Canadian IPO Could Make LA the 'Center of the Cannabis Universe'

Pat Maio
Pat Maio has held various reporting and editorial management positions over the past 25 years, having specialized in business and government reporting. He has held reporting jobs with the San Diego Union-Tribune, Orange County Register, Dow Jones News and other newspapers in Ohio, West Virginia, Maryland and Washington, D.C.
A $1.9 Billion Canadian IPO Could Make LA the 'Center of the Cannabis Universe'
Photo by Tim Foster on Unsplash

Ceres Group Holdings is becoming corporate America's biggest cannabis dealmaker out of its Century City offices.

The venture and private equity firm this week announced that its special purpose acquisition company, or SPAC, would take Atlanta-based cannabis producer Parallel public in a merger that will value the Canadian-listed company at $1.88 billion.

Parallel has about 42 retail stores outside of California, but has big plans for a big expansion into L.A. sometime in the next year or two.


The Parallel deal comes just as Ceres is trying to ink a separate deal to raise $100 million in a private fund to make cannabis investments throughout America, with particular focus on L.A. and California-based companies generally, according to Joe Crouthers, CEO of Ceres and head executive of the SPAC that bought Parallel.

"Parallel realizes that California, especially L.A., is the center of the cannabis universe," Crouthers said. "There's no presence in Southern California, but you will see one in the near future." A spokesperson later called to clarify that there are no immediate plans to enter the market.

Joe Crouthers is the CEO of Ceres and head executive of the SPAC that bought Parallel.

The new private fund is called Ceres Harvest II, and follows a prior fund that raised roughly $35 million to make investments in privately held cannabis companies — including Los Angeles-based pre-roll maker Palms, San Francisco-based edible company Rose Los Angeles, and Culver City-based dispensary MedMen Enterprises Inc. -- before it went public in May 2018.

Crouthers declined to disclose potential targets for the second fund.

The Ceres SPAC, officially known as Ceres Acquisition Corp., began trading last April, joining a wave of publicly traded companies that have moved to Canadian stock exchanges in recent years while they await the easing of U.S. rules on the cannabis sector. "That's the ultimate goal: to move to a U.S. exchange," Crouthers said.

The combined Ceres Acquisition Corp. and Parallel, which expects to generate $450 million in revenue in 2021 and report $100 million in earnings before taxes, will bag $430 million in cash when the deal closes in the next 60 to 90 days, Crouthers said.

Parallel has also received commitments from a group of investors led by Ceres for a $225 million private investment in a public equity – called PIPEs -- transaction when the deal closes.

The PIPE investment was over-subscribed, and attracted more than a dozen investments from athletes and celebrities, Crouthers said in the interview Tuesday.

The company, which also named record industry executive Scott "Scooter" Braun as a special adviser, said it currently has license applications pending in Georgia, New Jersey and Virginia. Braun, who is a co-founder of Ceres, is the talent manager for artists Justin Bieber, Ariana Grande and Kayne West.

Beau Wrigley Jr. who previously led his family's chewing gum business before selling it in 2008 for $23 billion, is Parallel's chairman and CEO.

Sturges Karban, chief executive officer of Irvine-based ManifestSeven Holdings Corp., noted that the Parallel deal is further confirmation of what looks to be an emerging trend of big deals getting done with cannabis-related SPACs – all being traded on Canadian exchanges.

U.S. firms that grow or sell cannabis cannot list their shares on the major U.S. stock exchanges as marijuana remains illegal at the federal level.

He pointed to completion of last month's deal by Jay-Z backed Californian pot producer TPCO Holding Corp. also known as The Parent Company, which is expected to generate $334 million in revenue in 2021.

"It [The Parent Company] kind of lit the fuse on what everybody expects to be a catalyst in California," Karban observed. "It's been inevitable that in a state this big and fragmented, that it would consolidate."

Like Jay-Z's company, Ceres Acquisition Corp. also trades on the Aequitas NEO Exchange Inc., or NEO. ManifestSeven, MedMen and cannabis review site Weedmaps — all based in Irvine — trade on the rival Canadian Stock Exchange, in Vancouver.

Editor's note: This story has been updated to properly reflect the artists Braun represents and clarify Parallel's expansion plan.

Subscribe to our newsletter to catch every headline.

Cadence

Activision Buys Game Studio Proletariat To Expand ‘World of Warcraft’ Staff

Samson Amore

Samson Amore is a reporter for dot.LA. He previously covered technology and entertainment for TheWrap and reported on the SoCal startup scene for the Los Angeles Business Journal. Send tips or pitches to samsonamore@dot.la and find him on Twitter at @Samsonamore. Pronouns: he/him

Xbox\u2019s various game developers it now owns: Activision, Blizzard and King.
Courtesy of Activision Blizzard

Activision Blizzard intends to acquire Proletariat, a Boston-based game studio that developed the wizard-themed battle royale game “Spellbreak.”

Read moreShow less
https://twitter.com/samsonamore
samsonamore@dot.la

Bling Capital’s Kyle Lui On How Small Funds Can Better Support Young Founders

Minnie Ingersoll
Minnie Ingersoll is a partner at TenOneTen and host of the LA Venture podcast. Prior to TenOneTen, Minnie was the COO and co-founder of $100M+ Shift.com, an online marketplace for used cars. Minnie started her career as an early product manager at Google. Minnie studied Computer Science at Stanford and has an MBA from HBS. She recently moved back to L.A. after 20+ years in the Bay Area and is excited to be a part of the growing tech ecosystem of Southern California. In her space time, Minnie surfs baby waves and raises baby people.
Bling Capital’s Kyle Lui On How Small Funds Can Better Support Young Founders

On this episode of the LA Venture podcast, Bling Capital’s Kyle Lui talks about why he moved earlier stage in his investing and how investors can best support founders.

Lui joined his friend—and first angel investor—Ben Ling as a general partner at Bling Capital, which focuses on pre-seed and seed-stage funding rounds. The desire to work in earlier funding stages alongside someone he knew well drew him away from his role as a partner at multi-billion-dollar venture firm DCM, where he was part of the team that invested in Musical.ly, now known as TikTok.

Read moreShow less
RELATEDEDITOR'S PICKS
LA TECH JOBS
interchangeLA
Trending