Liquidity and leverage in the cultivation and retail sectors remain a concern. Thirty-two companies have sell-side analyst coverage, and the median debt/ 2024 EBITDA for the group is 2.95x, a level that may be sustainable post 280e but is too high with current taxes. The third quartile statistic of 4.3x indicates that 25% of the group has leverage that will be difficult to support even in a post-280e environment. (See our weekly Viridian Insights for further explanation). We have been expecting that companies would be able to extend their debt maturities and reduce leverage through small equity issues. The likelihood of these equity issues was somewhat diminished by the cataclysmic price decline for the week ending 10/20/23.

Furthermore, the recently announced AYR restructuring and extension of debt maturities has made clear that the price for lender forbearance might be quite dear. The largest refinancing need we see on the horizon (relative to the company’s market cap) is now Jushi. It will be interesting to see if they roll the dice and hope for better equity issuance opportunities or take dramatic action like AYR.