Cannabis Stock Performance Since The Schumer/Booker Proposal

The graph shows how three different subsectors of the cannabis market have performed since the July 14, 2021 unveiling of the Schumer/Booker cannabis legalization proposal. 

We created three groups of cannabis stocks:

• • Tier 1 MSOs: AYR, Columbia, Cresco, Curaleaf, Green Thumb, Jushi, Planet 13, TerrAscend, and Trulieve.

  • Tier 2 MSO/SSOs: 4Front, Body & Mind, C21, Cansortium, Goodness Growth, Harborside, Lowell Farms, MariMed, Medicine Man, Stem, and the Parent Company.

  • Large Canadian LPs: Aurora, Canopy, Cronos, OrganiGram, Sundial, Tilray, and Village Farms.

• For each group we averaged the stock prices on each date and indexed them to a starting point of 7/14/21.

• The results make logical sense but are somewhat counterintuitive. The best performing group over most of the period (down 14.1%) were the large Canadian LPs. This group would be the biggest gainer from a full federal legalization scenario, which we believe is unlikely to occur over the next one to two years. In the meantime, investors who want exposure to cannabis but are restricted from investing in the US cannabis companies, continue to pour money into the group. We believe, however, that there is a definite risk that some of these companies, run out of other people's money before they attain cash self-sufficiency.

• The tier 1 US MSOs have performed the worst over the period (down 19.9%), despite stellar earnings releases and average year-over-year revenue gains averaging over 100%. We attribute this to their high valuation multiples relative to their smaller Tier 2 brethren and the greater liquidity of their stock. In a down market, you sell what is easiest to sell – the large MSOs.

• The best performers over the period were the Tier 2 MSO/SSOs. This group contains the only two gains over the period (4.4% and 10.3% gains from Marimed and Body & Mind, respectively). We continue to believe that some of these smaller but faster-growing companies offer the best investment potential in the cannabis market.

The Viridian Capital Chart of the Week highlights key investment, valuation, and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis and hemp industry. Each week the Tracker aggregates and analyses all closed deals and segments each according to key metrics:

• Industry Sector (one of 12 sectors, from Cultivation to Brands)

• The dollar value of the transaction

• Region in which the deal occurred (country or U.S. state)

• Status of the company announcing the transaction (Public vs. Private)

• Deal structure (equity vs. debt)

• Key deal terms (Pricing and Valuation)

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy.

 Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.

Photo by Javier Hasse.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.