November 8, 2024 – Florida is expected to have total medical sales of approximately $2.1B for 2024. Assuming that a fully rolled out adult use program would double sales, we get a gain of sales from adult use of $2.1B.
If we apply a 30% EBITDA margin to those sales (arguably conservative since it is marginal sales), we would get a $630M loss of EBITDA from the lost sales, and applying a 5x multiple to those sales (also arguably conservative) we would get a $3.15B projected decline in market cap.
So perhaps the selloff was not overdone. The weakness in our argument is the fact that not all of the companies on the list have Florida operations. However, approximately 81% of the market cap is held by Florida participants. Moreover, the impact of Florida is more severe than a “mere” $3B hit to market cap. It challenges the entire growth narrative of the industry.
Over the last few days, Trulieve, TerrAscend, Curaleaf, Jushi, Cannabist, and GTI have reported earnings, which were, in the aggregate, significant misses from already downbeat estimates. After incorporating actual results for the above companies, the total revenue for the fifteen companies we showed in our Chart of the week is projected to be down .4% Y/O/Y and 1.1% sequentially. EBITDA is down worse: 2.2% Y/O/Y and 4.2% sequentially.
Strange days indeed! There are so many potential positive catalysts, but they are laid out against a pretty stark current landscape. The need for a long time horizon just got extended out a bit further.
To View the Full Valuation Table and Valuation Metrics by Company Click on Our Viridian Valuation Tracker
About The Viridian Cannabis Deal Tracker
Launched in January 2015, and having analyzed more than $75B in deals, the Viridian Cannabis Deal Tracker is a proprietary data service that monitors and analyzes capital raise and M&A activity in the legal Cannabis, Hemp, and Psychedelics industries. Our insights help companies, investors, lenders and acquirers make informed capital allocation decisions. Each week the Deal Tracker provides proprietary data and market intelligence on transactions, including:
– Deals by Industry Sector (Track the Flow of Capital and M&A Deals by Industry Sector)
– Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A)
– Principals to the Transaction (Issuer/Investor/Lender/Acquirer)
– Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)
– Deals by Location of Issuer/Buyer/Seller (Track the Flow of Deals by State and Country)
– Credit Ratings (Leverage and Liquidity Ratios)
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Scott Greiper
CEO
Viridian Capital Advisors, LLC
646.330.0704
sgreiper@viridianca.com
