OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
Home » Week of 3/18/24-3/22/24
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.
The Software/Media sector credit metrics are worrisome. The 14 companies have a median current ratio of only .3x and a free cash flow adjusted current ratio of only .01x, indicating an urgent need for new capital. Leverage on a market cap basis is not extreme at only .48x total liability to market cap. However, a quick review of the cash flow-based leverage indicator funds from operation to total liabilities reveals the issue. Even the highest quartile of companies has negative funds from operation/ assets, indicating severely challenged profitability. The median company only has total assets of $1.68M and a market cap of $6.8M, indicating a low ability to sell ancillary assets to buffer the negative cash flow. The sector’s key customers in the cultivation and retail sector have been in a fat-trimming mode for the last 18 months, and it will take an upside catalyst to propel the sector towards better numbers. Rescheduling should unlock cultivators’ ability and desire to invest in better software systems.
The Software/Media sector credit metrics are worrisome. The 14 companies have a median current ratio of only .3x and a free cash flow adjusted current ratio of only .01x, indicating an urgent need for new capital. Leverage on a market cap basis is not extreme at only .48x total liability to market cap. However, a quick review of the cash flow-based leverage indicator funds from operation to total liabilities reveals the issue. Even the highest quartile of companies has negative funds from operation/ assets, indicating severely challenged profitability. The median company only has total assets of $1.68M and a market cap of $6.8M, indicating a low ability to sell ancillary assets to buffer the negative cash flow. The sector’s key customers in the cultivation and retail sector have been in a fat-trimming mode for the last 18 months, and it will take an upside catalyst to propel the sector towards better numbers. Rescheduling should unlock cultivators’ ability and desire to invest in better software systems.
*Marijuana remains illegal under federal law. The Federal Government does not recognize marijuana to have any medicinal values. Marijuana cultivation, possession, consumption, sales, and distribution are illegal under federal laws and also certain state laws. Please note that there are differences in marijuana laws from one state, county, or city to another.
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