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

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Valuation Tracker

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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 – U.S. MSOs with over $100M market cap
Joe Biden confirmed on Thursday, May 16th, that the DEA will be pursuing a rule to reschedule cannabis. Following Biden’s video, the Department of Justice confirmed it had sent a proposed rule to the federal register. Once the proposed rule is made public in the federal register, a 60-day public comment period is triggered.

Cannabis equities jumped to sizable gains immediately after the news, but by the end of the day, most of the gains had drifted away. 

This week’s Viridian Value Tracker data filtering investigates the valuation metrics of the sixteen U.S. Cultivation and Retail companies with market caps over $100M.

The group trades at  1st quartile, median, and 3rd quartile EV 2024 Revenues of 1.30x, 1.77x, and 2.54x, respectively, up slightly from  1.29x, 1.70x, and 2.48x on 9/10/23.

Similarly, the group now trades at 1st quartile, median, and 3rd quartile EV 2024 EBITDA of 5.96x, 7.77x, and 9.62x compared to 5.93x, 7.33x, and 10.14x on 9/10/23. Note that the third quartile was actually lower after Biden’s remarks.

So what happened? After the thrill of the political theater dissipated,  market participants realized again that the White House is not entirely in control of the process, which could still take months to years to conclude. The announcement did seem to at least put to bed any doubts about whether the DEA will indeed recommend S3, and we are a bit perplexed by the ho-hum market response.

Cannabis investors need to resist the urge to watch the tape. We all know the lineup of potential catalysts. But to think cannabis stocks should start trading rationally in the same week that “Roaring Kitty” returned to push GameStop higher by 50% is simply expecting too much. It’s still cannabis: monumentally illiquid stocks pushed by the tiny trading volumes of largely financially unsophisticated humans and a few robots, issues that are unfortunately destined to survive the elimination of 280e. SAFER, the Boies lawsuit and the Garland memo have not lost importance, and it will still likely require at least one of them along with S3 to fully right the ship.

Valuation Tracker By Sector

The Viridian Value Tracker is the most comprehensive valuation product in the industry.

    • 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.

Weekly Sector Valuation—Psychedelics improved a bit this week. Although the median market-to-book ratio of the 22 sector companies actually declined from 1.23x to 1.08x, both the lower quartile and 3rd quartile numbers improved, signaling an overall upward shift. Similarly, the median market to tangible Book value and associated quartiles all lifted from last week. Median EV/annualized revenue, for the eight companies with revenue increased from 1.00x to 1.14x.

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Weekly Sector Valuation—Psychedelics improved a bit this week. Although the median market-to-book ratio of the 22 sector companies actually declined from 1.23x to 1.08x, both the lower quartile and 3rd quartile numbers improved, signaling an overall upward shift. Similarly, the median market to tangible Book value and associated quartiles all lifted from last week. Median EV/annualized revenue, for the eight companies with revenue increased from 1.00x to 1.14x.