May 24, 2024 – This week’s Viridian Valuation Tracker focuses on the nine Psychedelic companies with over $10M of market cap. Psychedelic companies, like other predominantly pre-revenue sectors, are notoriously difficult to value. A quick peek at the valuation report shows that standard measures like EV/Revenue or EV/EBITDA are meaningless as only two of the nine companies have projected revenues in 2025, and none have positive EBITDA. Market/book is one metric that makes sense for the group. The current median value is 2.92x up from 2.50x at the end of April and 2.15x at the end of 2023.
Looking at the balance sheets of these companies, one might wonder, “How much of their market cap is made up of net cash?” All of these companies need to carry substantial cash balances to offset their negative cash flow, and few have any debt. The graph below shows the market-to-book ratios in orange and the net cash as a percent of the market cap in green. One would expect to see an inverse relationship here. We would expect that a company with 100% of its market cap made up of net cash should trade very near 1x market to book. The graph does show a bit of inverse correlation, but not as much as we might expect. Still, it is interesting to see that a sizeable portion of the market cap is made up of net cash.
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About Viridian Capital Advisors, LLC
Launched in 2014, Viridian Capital Advisors was one of the first and now leading, corporate finance, advisory and M&A practices in the legal Cannabis/CBD industries, and now in the Psychedelics sector. We represent companies, investors, lenders, buyers and sellers. Our advisory practice is meant to help “institutionalize” our clients before they go to market for capital or M&A – by helping to build a professional Board of Directors, sophisticated financial models and valuation analyses, exit strategies and strategic advisory services. Our investment banking practice raises capital and executes M&A transactions through our New York City based broker-dealer, Bradley Woods & Co. Ltd.
Viridian is widely recognized as the industry leader in research and capital markets data/market intelligence through the Viridian Deal Tracker. Launched in January 2015, the Viridian Deal Tracker is a proprietary data service that monitors and analyzes investment, M&A activity and capital markets trends in the Cannabis, Hemp and Psychedelics industries. We’ve tracked and analyzed more than 6,500 transactions totaling more than $70 billion in transaction value. We know where equity investors invest, where lenders lend and where acquirers acquire. The Deal Tracker is received and read every day by thousands of leading industry players on a global basis, becoming a trusted and valuable source for companies, investors, lenders and sellers/acquirers to make informed capital allocation decisions.
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