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 06/21/2024
Viridian Capital Chart of the Week: Is Financial Strength Related to YTD Stock Performance?
- The Viridian Chart of the Week explores the relationship between financial strength and YTD stock performance.
- We broke the 30 MSO/SSOs that Viridian ranks each week into five different groups arranged with the strongest six companies on the left (Group 1) and the weakest six companies on the right (Group 5).
- Group 1: Green Thumb, Trulieve, Grown Rogue, Verano, Cresco and Planet 13
- Group 2: Curaleaf, Cansortium (proforma), C21, MariMed, Vext, and Ascend
- Group 3: AYR, TerrAscend, 1933 Industries, Glass House, Leef Brands, and Goodness Growth
- Group 4: Jushi, Shwazze, Cannabist, Ianthus, Acreage, and 4Front
- Group 5: Tilt, Gold Flora, Red White & Bloom, Slang, Body & Mind, and StateHouse
- Group 1 is up 14% YTD, driven by an 81% gain by Trulieve and a 142% gain by Grown Rogue. Viridian correctly expected that the financially most robust companies would outperform in the current environment for several reasons:
- The capital markets have shown little sign of opening up, and what capital is available is expensive.
- The market has priced in very little of the theoretical value of rescheduling.
- In this environment, having the ability to buy back stock is a great advantage. Companies in Group 1, including GTI and Verano, have announced buybacks, and we would not be surprised to see Trulieve join the club. Buybacks do not preclude the issuance of new stock at higher prices.
- Expansion opportunities in Ohio, Pennsylvania, and Florida require capital, and the strongest companies are best positioned to make inroads.
- Group 2 performance was dragged down by YTD losses of 30% by MariMed and 33% by Vext, somewhat offset by a 63% gain by Cansortium.
- Group 3 is somewhat of an anomaly driven by the 46% gain by Glass House, the 14% gain by AYR, and the 107% gain by Goodness Growth.
- Group 4, down nearly 25%, was punished by the 30% decline in Schwazze, the 52% drop in Cannabist, and the 44% selloff in IAnthus.
- Given the continuing capital constraints, lack of new investment, and stubbornly low stock prices, we advise Investors to maintain a majority of investment funds in the strongest group, where Verano, Trulieve, and Cresco continue to appear relatively cheap. In a best-case environment with multiple successful catalysts, this positioning may underperform more risky selections. We, accordingly, recommend a barbell portfolio with a majority of funds in Group 1, with targeted investments in companies of lower strength that have positive torque from Florida and Pennsylvania catalysts.
