OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS

Credit Tracker By Industry Sector

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.

Week ended 10/25/2024

Weekly Sector Credit Cultivation and Retail Sector

  • The Cultivation and Retail sector credit metrics are improving ahead of any opening of the capital markets.
  • Liquidity is still an issue; however, the median annualized free cash flow adjusted current ratio of .68x indicates that over half of the 78 companies that the ratio was calculated for are likely to need additional funding to service their current liabilities over the next twelve months. Hopefully, the equity markets will become more friendly, and a re-equitization of the balance sheets will begin to be in the news. YTD 2024, however, over 98% of all capital raised has been debt.
  • Pending rescheduling and/or Florida rec, the equity window is essentially shut for plant-touching companies. As we have explained recently, in this unsettled environment, made worse by the presidential election, any announcement of an upcoming equity raise will be treated with great skepticism. Investors rightfully think, “If you are selling equity in THIS environment, then you must be really desperate for the cash,” and we want no part of it.” Similarly, no CFO wants to be the guy that raised equity only to find market prices up sharply within a short while.
  • Leverage is in line with our expectations. The median Debt/ 2024 EBITDA of 3.09x is right at the level that marks sustainability in a 280e environment. We have shown previously that companies subject to 280 e with Debt/EBITDA in excess of 3x will generally have an unacceptably long debt payback period. The 3rd quartile figure of 4.73x indicates that over 25% of the companies have unsustainable debt levels.
  • Total Liab/ market cap of 1.50x can be algebraically rearranged to show Asset value/ Liabilities, a measure of the Percent by which the market value of assets exceeds the liabilities. The median ratio is 1.67x, showing a 67% premium of asset value over liabilities.
  • In summary, despite, low liquidity and high median leverage, the plant-touching cultivation and retail sector continues to have relatively low leverage and solid asset value coverage of liabilities.
  • See the credit sector tracker for details on the credit metrics surrounding the Viridian Capital Credit Tracker model.

Week ended 10/25/2024

Weekly Sector Credit Cultivation and Retail Sector

  • The Cultivation and Retail sector credit metrics are improving ahead of any opening of the capital markets.
  • Liquidity is still an issue; however, the median annualized free cash flow adjusted current ratio of .68x indicates that over half of the 78 companies that the ratio was calculated for are likely to need additional funding to service their current liabilities over the next twelve months. Hopefully, the equity markets will become more friendly, and a re-equitization of the balance sheets will begin to be in the news. YTD 2024, however, over 98% of all capital raised has been debt.
  • Pending rescheduling and/or Florida rec, the equity window is essentially shut for plant-touching companies. As we have explained recently, in this unsettled environment, made worse by the presidential election, any announcement of an upcoming equity raise will be treated with great skepticism. Investors rightfully think, “If you are selling equity in THIS environment, then you must be really desperate for the cash,” and we want no part of it.” Similarly, no CFO wants to be the guy that raised equity only to find market prices up sharply within a short while.
  • Leverage is in line with our expectations. The median Debt/ 2024 EBITDA of 3.09x is right at the level that marks sustainability in a 280e environment. We have shown previously that companies subject to 280 e with Debt/EBITDA in excess of 3x will generally have an unacceptably long debt payback period. The 3rd quartile figure of 4.73x indicates that over 25% of the companies have unsustainable debt levels.
  • Total Liab/ market cap of 1.50x can be algebraically rearranged to show Asset value/ Liabilities, a measure of the Percent by which the market value of assets exceeds the liabilities. The median ratio is 1.67x, showing a 67% premium of asset value over liabilities.
  • In summary, despite, low liquidity and high median leverage, the plant-touching cultivation and retail sector continues to have relatively low leverage and solid asset value coverage of liabilities.
  • See the credit sector tracker for details on the credit metrics surrounding the Viridian Capital Credit Tracker model.

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