Vireo Growth to Acquire Schwazze's Convertible Notes

The cannabis industry is no stranger to major financial moves, and the latest news continues this trend. Minneapolis-based Vireo Growth Inc. has just announced its plan to acquire a significant portion of the outstanding senior secured convertible notes from Schwazze, a prominent U.S. multistate cannabis operator. This strategic acquisition, valued at approximately $62 million, signals a key development in Vireo's ongoing mergers and acquisitions (M&A) strategy.

For those watching the cannabis market, this move is more than just a financial transaction. It's a reflection of the evolving landscape where companies are making calculated decisions to strengthen their positions and capitalize on market opportunities. In this blog, we'll break down what this deal means, explore the concept of convertible notes, and discuss the wider implications for the cannabis industry. Understanding these dynamics is crucial for investors, operators, and enthusiasts who want to stay informed about the market's direction.

Unpacking the Vireo-Schwazze Deal

On October 2, 2025, Vireo Growth Inc. revealed it had entered into definitive agreements to acquire approximately 86% of the outstanding senior secured convertible notes of Schwazze (officially Medicine Man Technologies Inc.). The deal involves paying the third-party noteholders with subordinate voting shares of Vireo, at a deemed price of $0.54 per share, for a total consideration of about $62 million.

According to the press release published by Cannabis Business Times, the notes are being acquired at a price "substantially below par value." This detail is significant, as it suggests Vireo secured a favorable deal, potentially reflecting the current financial pressures within the cannabis market or a strategic opportunity for the noteholders to exit their positions.

The transaction is expected to close later this month, pending customary conditions and necessary approvals. This move is a clear continuation of Vireo's M&A strategy, highlighting its intent to expand its influence and investment portfolio within the U.S. cannabis sector.

What Are Senior Secured Convertible Notes?

To fully grasp the importance of this acquisition, it's essential to understand the financial instrument at its core: senior secured convertible notes. Let's break down this term.

Senior Secured Notes

In the world of corporate finance, a "note" is essentially a form of debt, similar to a loan.

• Senior: This indicates that the debt has priority over other, more junior debts. If the company were to face bankruptcy or liquidation, the holders of senior debt would be among the first to be paid back from the company's assets.
• Secured: This means the debt is backed by collateral. The company pledges specific assets (like property, equipment, or inventory) to the noteholders. If the company defaults on its payments, the noteholders have a claim on these assets.

This combination makes senior secured notes a relatively safe form of investment, as it offers multiple layers of protection for the lender.

Convertible Notes

The "convertible" aspect adds an interesting twist. A convertible note gives the holder the right to convert their debt into a predetermined amount of company equity (stock) at a future date. This feature offers the best of both worlds: the downside protection of a debt instrument and the potential upside of an equity investment.

If the company performs well and its stock value increases, the noteholder can convert their debt into equity and share in the company's success. If the company struggles, the noteholder can choose not to convert and instead receive their principal and interest payments as a creditor. For companies, especially those in emerging industries like cannabis, convertible notes are an attractive way to raise capital without immediately diluting existing shareholders' ownership.

By acquiring Schwazze's convertible notes, Vireo is not just buying debt; it's securing a potential equity stake in a major multistate operator. This gives Vireo a strategic foothold and a flexible investment that can adapt to Schwazze's future performance.

The Bigger Picture: M&A Trends in Cannabis

Vireo's acquisition of Schwazze's notes is part of a broader trend of mergers, acquisitions, and strategic investments shaping the cannabis industry. As the market matures, companies are consolidating to achieve scale, expand their geographic footprint, and gain a competitive edge.

Why Is Consolidation Happening?

Several factors are driving the wave of M&A activity in the cannabis sector:

• Capital Constraints: The cannabis industry is notoriously capital-intensive. Federal illegality in the U.S. makes it difficult for companies to access traditional banking services and loans, forcing them to seek alternative financing. Strategic investments and acquisitions are often the most viable paths to growth.
• Economies of Scale: Larger, consolidated companies can often operate more efficiently. They can centralize functions like cultivation, processing, and marketing, which reduces costs and improves margins.
• Market Access: Expanding into new states is a complex and expensive process, involving licensing applications and building out infrastructure. Acquiring an existing operator in a target state is often a faster and more effective way to enter a new market.
• Brand Building: A strong brand is a key differentiator in a crowded market. M&A allows companies to acquire established brands with loyal customer bases, rather than building them from the ground up.

Strategic Debt Acquisition

Acquiring debt, as Vireo has done, is a particularly savvy strategy. It allows the acquiring company to gain influence and a potential ownership stake in another operator at a potentially discounted rate, without the complexities and immediate costs of a full merger. If Schwazze thrives, Vireo stands to benefit from converting the notes to equity. If Schwazze faces challenges, Vireo, as a senior secured creditor, is in a strong position to recover its investment.

This move reflects a growing sophistication in the financial strategies being employed by cannabis companies. They are moving beyond simple equity raises and exploring more complex financial instruments to navigate the unique challenges and opportunities of the industry.

Your Guide to Staying Informed

The cannabis industry is dynamic and complex, with financial news like the Vireo-Schwazze deal constantly reshaping the landscape. For investors and enthusiasts, staying on top of these developments is key to making informed decisions. By understanding the fundamentals of transactions like this one, you can better appreciate the strategic thinking that drives the market forward.

At CBHD, we are committed to providing clear, insightful analysis of the latest news in the hemp and CBD industry. Follow our coverage to stay ahead of the curve and understand the forces shaping the future of cannabis.