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 03/08/2024

Hemp sector credit took a turn for the worse, with several key indicators showing deterioration:  Median Total liabilities to market cap for the 43 companies increased from 1.15x to 1.53x, with a similar decline seen across the quartiles. The median Z score for the industry also dropped significantly from -4.89 to -7.61. Florida’s Senate Bill 1698 was approved by the House and was sent to the governor. The bill bans hemp-derived products containing delta-8 and delta-10 and places caps on intoxicating delta-9 products. Critics of the bill allege that it may destroy the state’s hemp business. Other states are also considering stricter restrictions on intoxicating hemp products. These issues were expected to be cleared up in the new Farm Bill whenever Congress passes it.

The chart shows that sectors with higher median liquidity scores also tend to have higher median leverage. Perhaps the simplest view of this phenomenon is that companies with low FCF-adjusted current ratios tend to have large negative free cash flows, and that, in turn, makes them poor candidates for leverage.

Week ended 03/08/2024

Hemp sector credit took a turn for the worse, with several key indicators showing deterioration:  Median Total liabilities to market cap for the 43 companies increased from 1.15x to 1.53x, with a similar decline seen across the quartiles. The median Z score for the industry also dropped significantly from -4.89 to -7.61. Florida’s Senate Bill 1698 was approved by the House and was sent to the governor. The bill bans hemp-derived products containing delta-8 and delta-10 and places caps on intoxicating delta-9 products. Critics of the bill allege that it may destroy the state’s hemp business. Other states are also considering stricter restrictions on intoxicating hemp products. These issues were expected to be cleared up in the new Farm Bill whenever Congress passes it.

The chart shows that sectors with higher median liquidity scores also tend to have higher median leverage. Perhaps the simplest view of this phenomenon is that companies with low FCF-adjusted current ratios tend to have large negative free cash flows, and that, in turn, makes them poor candidates for leverage.

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