Weekly Credit Tracker
Credit ratings are not currently available for public cannabis companies leaving companies, lenders and investors with a gap of information. The Viridian Cannabis Credit Tracker fills this gap. The model uses 11 market and financial statement variables to discern 4 key credit factors: Liquidity, Leverage, Profitability, and Size, to provide credit/liquidity analysis for over 370 public Cannabis/Hemp companies.
Weekly Credit Report – Cultivation & Retail sector companies with between $10M and $200M market cap.
- The Viridian Credit model rankings of the 16 U.S. cultivation and retail companies with market caps between $10M and $200M are displayed graphically in the chart below. The model uses 11 financial and market ratios to estimate four key credit factors: Liquidity, Leverage, Profitability, and Size. The two most highly weighted factors, Liquidity (black line) and Leverage (red line), are plotted on the graph along with the overall Viridian Credit Rank (green line). The blue squares show the quoted offered side yield of the company’s debt. The table gives additional details of the measures used to determine the rankings.
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- Grown Rogue (GRIN: CSE) is the top-ranked credit by the Viridian model based on its number one ranking in leverage, #5 in liquidity, #2 in profitability, and #8 in size. The high ranking is no surprise, as the company consistently ranks in the top five, including much larger competitors. GRIN is the only company in this list to earn an “unlikely to default” range score on the Altman Z score.
- 4Front (FFNT: CSE) and Schwazze (SHWZ: CSE) rank #12/16 and #13/16, respectively. 4Front is in the midst of a capital structure review with Canaccord hired to study alternatives. Our Viridian Insights explores company the company’s options as well as the after-lease expense profitability of the company’s new Matteson cultivation location. Schwazze continues to have extremely high market leverage with total liabilities to a market cap of over 12x, a number that generally indicates distress.
- Note that our model ranks Acreage as the worst credit in the group. However, we recognize that the company’s financials and market value do not wholly reflect our assumption that Canopy will provide credit support if needed.
Credit Tracker By Sector
Credit ratings are not currently available for public cannabis companies leaving companies, lenders and investors with a gap of information. The Viridian Cannabis Credit Tracker fills this gap. The model uses 11 market and financial statement variables to discern 4 key credit factors: Liquidity, Leverage, Profitability, and Size, to provide credit/liquidity analysis for over 370 public Cannabis/Hemp companies.
Weekly Sector Credit – Psychedelics
- The bloom is off the rose with regard to psychedelic equities. The group has the worst LTM performance of the eleven public company categories we chart each week in the Viridian Deal Tracker.
- The sector’s biggest credit issue has always been liquidity. Ostensibly, the median current ratio of 2.88x would seem to indicate solid balance sheet liquidity. However, a more accurate picture is presented by our free cash flow adjusted current ratio, where we subtract annualized free cash flow from the numerator of the standard current ratio. The sector drops to a median of .09x on that basis, a figure that indicates a constant need for fundraising as clinical trials and drug discovery are massively cash-burning activities.
- With poor liquidity and negative cash flow, one might assume the credit picture here would be hopeless, but that neglects the market assessment of asset value. Suppose we algebraically rearrange the sector’s median total liabilities to market cap ratio of .26x. In that case, we can find that the Market value of Assets/ Liabilities is 4.84x, indicating substantial asset value coverage of liabilities. We haven’t seen PIK debt used as a financing method in the sector, but this metric seems to suggest that it might make sense. It wouldn’t be the craziest thing we’ve seen.
Weekly Sector Credit – Psychedelics
- The bloom is off the rose with regard to psychedelic equities. The group has the worst LTM performance of the eleven public company categories we chart each week in the Viridian Deal Tracker.
- The sector’s biggest credit issue has always been liquidity. Ostensibly, the median current ratio of 2.88x would seem to indicate solid balance sheet liquidity. However, a more accurate picture is presented by our free cash flow adjusted current ratio, where we subtract annualized free cash flow from the numerator of the standard current ratio. The sector drops to a median of .09x on that basis, a figure that indicates a constant need for fundraising as clinical trials and drug discovery are massively cash-burning activities.
- With poor liquidity and negative cash flow, one might assume the credit picture here would be hopeless, but that neglects the market assessment of asset value. Suppose we algebraically rearrange the sector’s median total liabilities to market cap ratio of .26x. In that case, we can find that the Market value of Assets/ Liabilities is 4.84x, indicating substantial asset value coverage of liabilities. We haven’t seen PIK debt used as a financing method in the sector, but this metric seems to suggest that it might make sense. It wouldn’t be the craziest thing we’ve seen.
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