Viridian Chart Of The Week: Small Under-Covered Cannabis Operators Outperform Large MSOs YTD

The graph compares the price of a basket of large MSOs that are well covered by cannabis research analysts to the price of a basket of smaller less-covered MSO/SSOs for YTD 2021.

• The smaller, less-covered companies are more volatile, generally rising faster in up markets and declining faster when pricing weakens. This is consistent with the markets for these stocks being less liquid.

• YTD the smaller cap, less-covered group has outperformed their more covered counterparts by approximately 9%, however the gap has been as wide as 22%.

• We have discussed the small vs large cap valuation gap in previous Viridian Capital Charts of the Week and this graph provides some modest evidence of a narrowing of that still immense divide.

• One of the themes of Viridian’s Equity Research is that better risk adjusted returns can be obtained by investors focusing on lesser known but still solid names.

• We expect to see smaller public companies continue to narrow the valuation gap further in 2021 as capital becomes more accessible for them to build out their operations and they increasingly are targeted for acquisitions by the larger MSOs.

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 analyzed all closed deals and segments each according to key metrics:

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

• 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.

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