Cannabis Valuations

Cannabis stock prices and valuation multiples have been trending downwards since peaking in mid-February 2021 with multiples fluctuating around 15x.

They spiked upward in February 2021 on renewed hopes of federal legalization and have drifted lower ever since, despite improving profitability and cash generation, proven access to both debt and equity capital markets, strong cash positions, scaled operations, and the near-certainty of legalization, albeit with an uncertain timetable.

The market is likely to get an upward boost from news that the Safe Act will be attached to the America COMPETES (Creating Opportunities to Meaningfully Promote Excellence in Technology) Act of 2022, a domestic spending bill. We doubt that the bill will get any further now than before, but it is likely to give the market a temporary boost.

Viridian Capital Advisors projects Federal legalization in 2025 followed by a spike upward in growth. With legalization, they project two years of increased growth followed by slowing growth for the following years as cannabis normalizes into a regular consumer staple.

The macro headwinds are considerable, but multiples are in excellent value territory. Legalization or banking reform is likely to bring new investors into the cannabis market with positive effects.

Episode 884 The #TalkingHedge looks at Viridian Capital Advisors’ report…
https://youtu.be/HTc_ONWz9Xk
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