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 – The Burden of Net Debt and Uncertain Tax Liabilities
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- The cannabis stock market clearly believes that the rumors of imminent rescheduling are real. The MSOS had the largest percentage increase in its history last week, and it has risen further so far this week.
- The prospect of eliminating 280E is a welcome one. However, we do not anticipate that the IRS will waive all past 280E liabilities that companies have accrued on their balance sheets under “Uncertain Tax Liabilities.” Some of these amounts are quite significant compared to the cash flows of the companies
- The chart below adds the current net debt (blue bars) and uncertain tax liabilities (orange bars) to arrive at the total amount required to repay debt and taxes. We calculated the average analyst consensus estimate of cash flow from operations for 2025 and 2026 for each company and divided total repayment needs by this figure. One can think of this as the number of years of cash flow from operations required to pay off all debt and taxes. Note that, in calculating these figures, we have added back an estimate of 280E taxes paid by GTI to reflect the fact that they alone have kept these taxes current. We have also treated the preferred stock of Glass House as debt, based on our judgment that it has some debt-like features.
- For GTI, this combined burden is less than 1 year. Trulieve is about 2 years. But from there on, moving rightward on the graph, the numbers jump to over six years. The highest figures on the far right, Ascend, TerrAscend, and Jushi are much higher at 11, 14, and 19 years, respectively. Of these companies, only Jushi still needs to refinance its 2026 maturities.
- We are realistic about the fact that debt is a permanent part of capital structures, and much of it will be refinanced rather than paid off. Still, the graph depicts the balance sheet damage caused by relying almost exclusively on debt financing over the past few years, while deferring 280E taxes.
- We do not expect the IRS to present a due bill with a request for immediate payment. But neither do we think that the deep discounts that Harborside received in its settlement with the IRS a few years ago are likely to be repeated.
- We hope that companies will use the equity price pop from rescheduling to re-equitize their balance sheets to reduce these burdens.
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 – Cultivation and Retail Sector
- The chart below shows the credit metrics for the Cultivation and Retail sector.
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- The median free cash flow-adjusted current ratio for the 74 Cultivation & Retail companies in the Viridian credit tracker database is 1.04x, indicating that about 50% of the companies have sufficient liquidity to meet their current liabilities without additional financing.
- Similarly, the total liabilities-to-market cap median of 1.22x is down this week, but not as much as it would be if the sector were composed solely of U.S. companies that stand to benefit more from 280E relief. Still, the figure aligns with market belief that, on average, the sector has solid asset coverage of its liabilities.
- The total debt/2025 EBITDA of 1.94x is significantly better than the 3x+ figure that would be attached to a U.S.-only grouping. This coincides with our earlier finding that Canadian companies tend to be less levered than their U.S. counterparts.
Weekly Sector Credit – Cultivation and Retail Sector
- The chart below shows the credit metrics for the Cultivation and Retail sector.
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- The median free cash flow-adjusted current ratio for the 74 Cultivation & Retail companies in the Viridian credit tracker database is 1.04x, indicating that about 50% of the companies have sufficient liquidity to meet their current liabilities without additional financing.
- Similarly, the total liabilities-to-market cap median of 1.22x is down this week, but not as much as it would be if the sector were composed solely of U.S. companies that stand to benefit more from 280E relief. Still, the figure aligns with market belief that, on average, the sector has solid asset coverage of its liabilities.
- The total debt/2025 EBITDA of 1.94x is significantly better than the 3x+ figure that would be attached to a U.S.-only grouping. This coincides with our earlier finding that Canadian companies tend to be less levered than their U.S. counterparts.
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