Weekly Valuation Tracker
Viridian highlights a specific industry sector and provides a deep dive into valuation metrics and comparable company valuations for public companies operating in that sector. The Weekly Valuation Tracker provides proprietary, actionable valuation data.
Weekly Valuation Report – The Impact of ESOP structures on MSO valuation
- One of the strongest undercurrents of discussion at Benzinga was regarding Employee Stock Ownership Plans (ESOPs). Every law firm we talked about is working on this structure. The reason is obvious: with S3 indefinitely postponed, finding an alternative means of reducing taxes is top-of-mind. ESOPS go beyond S3; they not only eliminate 280E taxes but All income taxes.
- There is a price to be paid. Sellers entering an ESOP will be giving away 30% of the equity to the trust for employees, a group that, in most cannabis companies, currently has close to zero ownership. Of course, there is a benefit to this as well. Employees start to act like owners, taking care of things like making sure the lights are turned off at night.
- The natural question is how much value these structures produce. We analyzed this question using our DCF model, which calculates the range of 2025 EV/EBITDA multiples that represent intrinsic value.
- Our model utilizes consensus analyst forecasts for a group of 12 major MSOs regarding growth rates and EBITDA margins through 2027. We will use full 280E taxes in 2025 and 2026 but assume S3 occurs in time for the 2027 tax year. Our reinvestment assumptions at 4x Sale/Capital could be considered capital light, reflecting recent capacity additions.
- The model produces a range of multiples with a median of approximately 6 times EV/2025 EBITDA. When we zero out the taxes, we achieve a median valuation of 7.6x, implying an increase in Enterprise value of 27% and a greater increase in equity value since the debt remains constant. We are happy to discuss these results and the detailed model that underlies these summaries upon request.
Valuation with Status Quo
Valuation with ESOP
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Valuation Tracker By Sector
The Viridian Value Tracker is the most comprehensive valuation product in the industry.
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- A broad set of 12 valuation measures assures applicability, regardless of whether the company has analyst coverage or revenues. The typically presented EV/ Projected Revenues and EV/ Projected EBITDA are available for less than 1/3 of the cannabis companies we track.
- Most valuation studies present only the average valuation measures, while the Tracker goes one step further and shows the distribution of values (the quartiles, median, and dispersion) for each measure. This gives users a more complete view of how companies in the cohort group are valued.
Sector Valuation Report – Cultivation & Retail
- The median EV/2025 EBITDA is now 5.22x, modestly below the 6x intrinsic value we got from our DCF analysis reported above. Key factors contributing to the low multiples include a lack of growth and margin pressures. Consensus estimates now project 2025 revenues to be down about 3% from 2024 for the top 12 MSOs. Similarly, EBITDA margins are projected to be down from 25.90% in 2024 to 24.66% in 2025. Growth picks up in 2026, but margins remain relatively flat. We also project that the industry will likely have to wait until 2027 for full 280E relief.
- Market to book ratios continue to hover only slightly over .5x, indicating a potential for asset write-downs.
- See our weekly value sector analysis for more details.
This Chart is Only Available to Higher Tier Memberships
Please Purchase a Premium or Enterprise membership to see more.
Sector Valuation Report – Cultivation & Retail
- The median EV/2025 EBITDA is now 5.22x, modestly below the 6x intrinsic value we got from our DCF analysis reported above. Key factors contributing to the low multiples include a lack of growth and margin pressures. Consensus estimates now project 2025 revenues to be down about 3% from 2024 for the top 12 MSOs. Similarly, EBITDA margins are projected to be down from 25.90% in 2024 to 24.66% in 2025. Growth picks up in 2026, but margins remain relatively flat. We also project that the industry will likely have to wait until 2027 for full 280E relief.
- Market to book ratios continue to hover only slightly over .5x, indicating a potential for asset write-downs.
- See our weekly value sector analysis for more details.
