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 10/25/2024
Viridian Capital Chart of the Week: The Potential Impacts of Florida Rec vs Rescheduling
- The bars on the graph show the two-week stock gains for the 15 largest market cap U.S. MSOs. The green bars indicate companies with a Florida presence, while the blue bars are companies with no Florida presence. Recent gains appear to be related to Florida. Two themes are driving cannabis stock prices: Florida rec and rescheduling. The graph tries to evaluate the relative importance of each theme.
- We calculated the potential impact of adult rec in Florida by assuming that adult rec would have a 2.25x multiplier effect on retail sales on a run rate basis. Florida retail sales for 2024 will be approximately $2.1B spread across an average of 650 dispensaries (691 as of 10/25/24) for an average revenue per dispensary of $3.2M. The average revenue gain per dispensary of $4.0M was used to calculate each company’s incremental revenue gain from adult rec. We value this additional revenue using an assumed EV/2025 revenue multiple of 2.0x, a higher multiple than the median 1.5x we measure for the group. The higher multiple is warranted by the profitability inherent in the limited license, vertically integrated, oligopolistic nature of Florida, where the top ten companies have 84% of the total dispensaries. Taking this incremental enterprise value and dividing it by the current share count gives our estimate of per-share gains, which are shown in percentage form by the orange line on the graph.
- The gains from Florida rec are quite significant, ranging from 350% for Cansoritum down to 6% for Green Thumb. Cansortium, AYR, and Planet 13 appear to gain more from Florida Rec than they will from S3.
- Gains from S3 are calculated by taking our estimate of the lower taxes from the elimination of 280 and valuing these gains by applying the average 2025 EBITDA multiple for the group of 6.6x grossed up to recognize that 280e savings are after-tax savings. The result, stated on a per share, percentage gain basis, is shown by the purple line on the graph.
- Unsurprisingly, the elimination of 280e has a more dramatic influence on most companies on the graph, even those with a substantial presence in Florida, like Cresco, Curaleaf, and Trulieve. Green Thumb, with only 20 dispensaries in Florida, clearly gains more from 280e relief than Florida rec.
- Investors are anticipating a positive result in Florida. Moreover, they view the impact of this move as less uncertain than that of a potentially drawn-out rescheduling implementation.
- S3 and Florida Rec will also have a potent psychological impact on the cannabis market, with rising overall pricing levels even for those companies without either a Florida presence or a significant 280e impact.
