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 – How much balance sheet degradation has three years of nearly exclusive debt financing caused for the U.S. Cultivation & Retail sector?
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- The chart below shows the total liabilities to total assets for a group of 31 MSOs, including all of the Tier One and Tier Two companies that we credit rank each week in the Viridian Credit Tracker model.
- Our weekly Deal Tracker report shows that since 2022, over 90% of all capital raised by the U.S. cultivation & retail sector has been in the form of debt.
- The chart shows that liabilities to assets (a measure of balance sheet leverage) declined from .52x in January 2020 to a low of .43x in June 2021 based on the significant equity raises accomplished in early 2021. Eight of the sixteen equity transactions over $100M that closed in the U.S. cultivation and retail sector since 2020 occurred in the first four months of 2021. A total of $1.2B in funds were raised in those eight transactions, nearly 3.5x the amount of equity that was raised from 2022 through April 18, 2025.
- Since then, total liabilities / total assets (shown by the green line) have climbed steadily to approximately .685x in the most recent financial statements.
- To repair balance sheets back to .60x liabilities to equity, a level last seen in September 2023, would require refinancing approximately $1.64B of liabilities with equity.
- The increase in leverage has been more dramatic in terms of market leverage as measured by total liabilities to market cap (the orange line).
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- The cultivation and retail segment needs to re-equitize. Current leverage is unsustainable in a 280E environment and certainly less than optimal even without 280E. The trick is how to get there. As long as S3 and SAFER remain out in the distance, providing “Hope” but without any significant movement towards their accomplishment in Washington, the equity market is likely to stay locked up, preventing any significant balance sheet repair.
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 & Retail Sector
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- The median Debt/ 2025 EBITDA for the cultivation & retail sector is now 3.50x, a level that would be unsustainable if companies were actually paying their 280E taxes. Instead, in typical cannabis fashion, the can is being kicked down the road by accruing but not remitting these balances. We are not sure how it all works out. Likely, the amounts will be negotiated down and, at the very least, won’t be due tomorrow, so perhaps that’s a win? Our calculations show that as long as institutional lenders require short maturities, 3.5x is close to the boundary level of leverage even after 280E.
- Liquidity is a better news item. The median free cash flow adjusted current ratio is now 1.03x. It is not super comfortable, with “plenty of cash in the bank” level, but indicative of operator efforts to restrain capex. It shows that at least half of the sector is prepared to make it through the year without requiring outside financing – quite an achievement given the capital-intensive nature of the business.
- The size metrics show the considerable room for and need for consolidation. The median total assets and market cap are only $44M and $16M, respectively. You would be hard-pressed to find another major American industry where the most prominent players are as small as in cannabis. We expect the industry, over time, to become hourglass-shaped, with a limited number of generally much larger companies on the top, a slew of craft-scale companies on the bottom, and not many in between.
Weekly Sector Credit – Cultivation & Retail Sector
-
- The median Debt/ 2025 EBITDA for the cultivation & retail sector is now 3.50x, a level that would be unsustainable if companies were actually paying their 280E taxes. Instead, in typical cannabis fashion, the can is being kicked down the road by accruing but not remitting these balances. We are not sure how it all works out. Likely, the amounts will be negotiated down and, at the very least, won’t be due tomorrow, so perhaps that’s a win? Our calculations show that as long as institutional lenders require short maturities, 3.5x is close to the boundary level of leverage even after 280E.
- Liquidity is a better news item. The median free cash flow adjusted current ratio is now 1.03x. It is not super comfortable, with “plenty of cash in the bank” level, but indicative of operator efforts to restrain capex. It shows that at least half of the sector is prepared to make it through the year without requiring outside financing – quite an achievement given the capital-intensive nature of the business.
- The size metrics show the considerable room for and need for consolidation. The median total assets and market cap are only $44M and $16M, respectively. You would be hard-pressed to find another major American industry where the most prominent players are as small as in cannabis. We expect the industry, over time, to become hourglass-shaped, with a limited number of generally much larger companies on the top, a slew of craft-scale companies on the bottom, and not many in between.
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