Valuations of Tier 2 Cannabis Companies in the U.S. Cultivation and Retail Sector
In a recent report by Viridian Capital Advisors, the focus is on the valuations of companies within the U.S. cultivation and retail sector, specifically those with market caps ranging from $100 million to $500 million. These companies, commonly referred to as ‘Tier 2’ enterprises, have seen a reduction in their numbers from ten last year to eight currently.
The report comes in response to recent market dynamics, particularly the private equity placement by industry player Planet 13 Holdings Inc. (PLNHF). The strategic analysis aims to shed light on the valuations of these Tier 2 companies and understand the trends and changes in the industry.
Despite a 5-week market rally and evolving prospects, valuations persistently remain below the figures reported in the previous year. The median market to book for the group now stands at .99x, a significant drop from the 1.90x reported last year. Similarly, the median EV/annualized revenue has descended to 1.16x from the previous 1.98x, and the median EV/EBITDA for the current year records a substantial dip from 9.85x to 5.46x.
These figures present a stark contrast, especially considering the enhanced industry landscape. However, companies have implemented strategic measures such as cost-cutting, streamlined working capital management, prudent reduction of unnecessary capital expenditures, strategic exits from unprofitable states, and an overall bolstering of operational efficiency.
As the market continues to evolve, Tier-2 MSOs (multi-state operators) have displayed noteworthy resilience and success. Companies like TerrAscend Corp (TRSSF), Glass House Brands Inc (GLASF), and Ayr Wellness Inc. (AYRWF) have spearheaded this positive trend, leading the sector with an impressive 4% year-to-date increase.
The valuation multiples for this Tier 2 group highlight the substantial upside potential embedded in the current market landscape. Investors and industry players can explore the full list of Viridian Credit Rankings for public multi-state operators (MSOs) on the Viridian Capital Advisors website.
Viridian Capital Advisors, launched in 2014, specializes in corporate finance, advisory, and M&A practices within the legal cannabis/CBD industries. The firm has extended its influence into the emerging psychedelics sector, further expanding its expertise and services.
As the cannabis industry continues to grow and evolve, keeping track of valuations and market trends becomes crucial for investors and industry participants. The report by Viridian Capital Advisors provides valuable insights into the valuations of Tier 2 companies in the U.S. cultivation and retail sector, offering a comprehensive analysis of the current market dynamics.