OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
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Chart of the Week
Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Week ended 09/13/2024
Viridian Capital Chart of the Week: Cannabis Credit Markets are Hot Across the Credit Quality Spectrum
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- The cannabis debt market is HOT! The five issues shown on the chart were all completed in the third quarter of 2024 (with two weeks remaining) and account for approximately $632M of proceeds, greater than any quarter since the fourth quarter of 2021.
- The graph shows the effective cost of the transaction on the vertical axis with the Viridian Credit Ranking at the time of the transaction on the horizontal axis. The close fit of the regression line (R-squared of .91) shows that the market is accurately taking into account the credit risk of the issuers in its pricing of new issues.
- The most significant outlier is the 12.75% cost for TerrAscend, which we had expected to carry a higher yield. TSND’s less-than-stellar credit ranking was partially attributable to the liquidity pressures that the new financing alleviated. The company is currently ranked three notches better at #11.
- The Jushi (JUSH: CSE) transaction was for first-priority notes, which are now quoted at closer to 17%.
- All of the deals on the chart represent refinancings of existing debt. An additional $114M of refinancings occurred earlier in the year for ARY (AYR.A: CSE), PharmaCann (Private), and Cannabist (CBST: Cboe).
- Significant growth capital debt deals have also closed for private companies, including a $40M Sunburn deal and $20M for Nova.
- This week’s Acreage (ACRDF: OTCQX) refinancing demonstrates that investor demand exists for companies across the credit quality spectrum. Viridian ranks Acreage at #28/31 due to its extremely high (14.5x) total liabilities to market cap and total liabilities to assets (1.6x). However, we expect the additional liquidity provided by the transaction may improve the company’s ranking somewhat in the future.
- With cannabis equity markets range-bound and skeptical, awaiting S3 or further developments on SAFE, the debt market is thankfully continuing to be the principal capital source for the cultivation and retail sector for both squeaky clean credits like Green Thumb (GTII: CSE) as well as more challenging underwritings like Jushi and Acreage.
