BY: Viridian Capital Advisors, LLC ( WWW.VIRIDIANCA.COM) 

  • Florida centric cannabis stocks rose more than the overall market last week as investors await an April 1, 2024 deadline for the Florida Supreme Court to rule on whether adult Floridians will be allowed to vote for on a constitutional amendment to legalize adult recreational cannabis.
  • Viridian calculated an estimate of the torque that each company has with regard to Florida. The measure (shown in the green bars) is the number of dispensaries each company has in Florida divided by the company’s enterprise value. Cansortium (TIUM.USD: CSE) and AYR (AYR.A: CSE) are the two companies with the highest torque, followed by Plane 13 (PLTH: CSE), and Cannabis (CBST: Cboe). The orange line depicts last week’s  percentage increase in each company’s stock.
  • Investors clearly believe the bill will be approved by the Florida Supreme Court. The graph shows Florida centric stocks outpaced stocks with less or no contribution from Florida.
  • Assuming a go ahead by the Court, recreational use in Florida still has one additional major hurdle. The constitutional amendment requires a 60% supermajority to pass and that is a tough standard. The first time Floridians voted on medical cannabis in 2014, the measured received 57% of the vote, failing to meet the 60% criteria.  The measure passed with a 71% approval in 2016.  Ohio voters approved adult use last year by a 57% level.  The polls are all over the place with a University of North Florida poll in 2023 showing 70% support but a Florida Chambre of Commerce poll released in January showed on 57% voter support.
  • How big would Florida Adult use be? The rule of thumb in the industry says that when markets go adult, revenues roughly double. Florida estimated 2024 sales are approximately $2.8B, so the impact of a doubling would represent a 7.3% increase in total 2024 U.S. Cannabis sales. The rule of thumb may even be a bit conservative with regard to Florida. If Florida legalized sales approached the level of Colorado on a $/per adult resident basis, sales would rise by closer to 120%. Potential for Florida and Pennsylvania to both turn rec is one of the reasons Viridian believes consensus growth estimates for 2025 are likely to be beaten.
  • The gains could be immense for the companies with the highest Florida torque. If one estimates, for example, that Florida represents 75% of Cansortium’s LTM revenues of $95M, and one projects a doubling of those revenues valued at 1x EV/revenue, it could represent a doubling of the stock. Florida rec might be a bigger deal for Cansortium than rescheduling.
  • AYR might be a similar story. Florida represents 70% of AYR’s stores, approximately 57% of its cultivation square feet, and about 40% of its employees. The company does not disclose Florida revenues, but would it be crazy to guess 50% of the company’s revenues come from Florida?  Doubling those revenues and valuing them at 1x could also represent a doubling of the stock.
  • The impacts of a full doubling of Florida revenues will not be fully realized in 2025 or perhaps even 2026, but the impacts are so significant that Investors need to keep a close on eye players with high Florida torque.

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.

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