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 12/20/2024
Viridian Capital Chart of the Week: A Whimsical, if not Heretical Idea: MSO Stock Buybacks for the Holidays?
- A glance at current stock prices shows that many MSOs are at multi-year, if not all-time, lows. However, EBITDA projections for 2025 are far from terrible; the aggregate 2025 EBITDA for the group on the graph is 7.6% higher than that for 2024.
- The graph takes 2025 projected EBITDA and multiplies it by 4x to get a hypothetical debt limit for each company (assuming a post-280e environment). From that hypothetical limit, current debt is subtracted to arrive at the potential incremental debt that could be added.
- The blue line on the graph is the potential incremental debt as a percentage of the current market cap. Three companies show percentages over 100%, including Verano (144%), Trulieve (118%), and Ascend (188%).
- Schwazze (not pictured) is the extreme case. At 4x its projected 2025 EBITDA, its hypothetical debt limit of $232M exceeds its current debt of $168M by $64M, roughly 20 times its current market cap.
- The orange line takes a more conservative view. It subtracts out both existing debt and “excess tax liabilities,” defined as any accrued taxes in excess of 90 days of tax expense. These liabilities are large enough that after netting them out, no company on the chart can afford to buy back all of its shares.
- Still, the orange line shows very significant buyback capability.
- Viridian is not suggesting that leveraged recaps or LBOs are likely. But, we ARE suggesting that the ability to buy back large percentages of outstanding shares through excess debt capacity is just another way of showing that the current market is drastically undervalued.
