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
- This week’s credit screen evaluates the fourteen midsized U.S. and Canadian Cultivation and Retail sector companies with market caps between $50M and $200M.
- The green line on the chart below shows the Viridian Capital Credit Tracker ranking each company based on the model’s four credit evaluation factors: Liquidity, Leverage, Profitability, and Size) The red line shows the leverage ranking, which is the most important of the four factors. The black line shows the liquidity ranking, which is the second most crucial factor.
- Cansortium’s (TIUM.USD: CSE) #6/14 ranking is based on our proforma analysis of its planned merger with RIV Capital (RIV: CSE). We caution investors because the risk arb spread on this transaction widened to over 105% last week, indicating significant market doubt that the deal will close. The transaction is critical to Cansortium’s ranking, and it will fall sharply if the agreement is canceled.
- Frequent Deal Tracker readers will not be surprised to see Grown Rogue (GRIN: CSE) (GRUSF: OTC) at the top of our credit rankings as it occupies a top four position even compared to much larger companies like GTI (GTII: CSE) and Trulieve (TRUL: CSE).
- The top three Canadian companies on our list in this size range may be more controversial: High Tide (HITI: NASDAQ), Organigram (OGI: NASDAQ), and Village Farms (VFF: NASDAQ).
- Each benefits from relatively low market-based leverage (total liabilities/market cap). This ratio is critical when comparing credits from both the U.S. and Canada. Traditional measures such as Debt/EBITDA fail to take into account the high 280e taxes paid by the U.S. companies, which reduces the amount of EBITDA that makes it to the free cash flow line.
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
- This week’s Credit Sector Tracker profiles the 55 companies in the Biotech/Pharma sector.
- Ostensibly, these companies have adequate liquidity, with a 1.42x median current ratio. The free cash flow adjusted ratio, however, tells a different story. The median value of .18x says that a majority of the sector does not have sufficient funding to cover its short-term liabilities for the year and will require additional financing. The top 25% are fully funded.
- The median total liabilities/ market cap of .25x tells us that the market is quite comfortable with the asset value coverage of the sector’s liabilities.
- Cash flow is another story. All quartiles of funds from operation/total liabilities are negative. This is not unexpected in a sector where many of the companies are pre-revenue and funding large discovery programs and clinical trials.
- Companies in the sector tend to be relatively small, with median market caps of $16M. Small size tends to limit the amount of ancillary assets that can be sold to maintain liquidity in a pinch.
- The credit profile of the sector suggests we should see a brisk amount of consolidation occurring.
Weekly Sector Credit
- This week’s Credit Sector Tracker profiles the 55 companies in the Biotech/Pharma sector.
- Ostensibly, these companies have adequate liquidity, with a 1.42x median current ratio. The free cash flow adjusted ratio, however, tells a different story. The median value of .18x says that a majority of the sector does not have sufficient funding to cover its short-term liabilities for the year and will require additional financing. The top 25% are fully funded.
- The median total liabilities/ market cap of .25x tells us that the market is quite comfortable with the asset value coverage of the sector’s liabilities.
- Cash flow is another story. All quartiles of funds from operation/total liabilities are negative. This is not unexpected in a sector where many of the companies are pre-revenue and funding large discovery programs and clinical trials.
- Companies in the sector tend to be relatively small, with median market caps of $16M. Small size tends to limit the amount of ancillary assets that can be sold to maintain liquidity in a pinch.
- The credit profile of the sector suggests we should see a brisk amount of consolidation occurring.
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