June 17, 2024 – This week’s Viridian Chart of the Week shows the YTD stock performance of two equally weighted baskets of stocks. The orange line depicts the YTD performance of a basket of the top five MSOs by market cap: Curaleaf, GTI, Trulieve, Verano, and Cresco. The green line shows the YTD results of a basket of the top five cannabis lenders and sale-leaseback providers: IIPR, Chicago Atlantic, AFC Gamma, NewLake Capital, and Silver Spike.
The blue line shows the MSOS ETF’s YTD performance. Note that the MSOS ETF price has a .97 correlation with the price of a simple equal-weighted basket of the top five MSOs but significantly underperforms the basket due to administrative expenses.
On a YTD basis, the 14.7% YTD return on the lender group outpaced the 9.75% return on the MSO basket and significantly exceeded the 0.25% loss on the MSOS ETF. Both the MSO basket and the MSOS ETF have dropped for four consecutive weeks.
The slow and steady rise of the lender group basket vs. the wild ride the MSO group has experienced is rooted in the fundamental nature of the two bets. We continue to believe that a doubling of MSO prices is likely as the full impact of rescheduling is realized, but we do not expect that the lender group will double. Lenders will benefit strongly, however, from the improved credit profile of their portfolio companies and the NPV boost to loan portfolio values from an expected reduction of cannabis borrowing rates.
Check Out the Viridian Chart of the Week to See Our Full Analysis of EBITDA Multiples for Public MSOs
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.
Marijuana remains illegal under federal law. The federal government does not recognize marijuana to have any medicinal value. Marijuana cultivation, possession, consumption, sales, and distribution are illegal under federal laws and also certain state laws. Investors in cannabis may be subject to law enforcement actions. Please note that there are differences in marijuana laws from one state to another. Furthermore there are substantial risks associated with investing in cannabis companies, including, without limitation, changes in laws, rules, and regulations, risks associated with the economy, capital markets, and a company’s ability to execute on its business plan.
