The cannabis cash crunch might be separating the winners the from losers, turning it into a green rush only for the financially fit.
New analysis by cannabis industry research firm Viridian Capital Advisors suggests that financial strength is closely tied to stock performance in the U.S. marijuana sector this year, as opposed to the hopes and dreams of a brighter future for the companies tomorrow that’s been seen in the past.
The study, released as part of Viridian’s Chart of the Week series, looked at 30 companies – including multistate and single-state operators – in the cannabis industry. The list was divided into five groups based on their financial robustness, with the strongest performers clustered at the top.
According to the report, the six companies clustered as the strongest companies financially recorded an average year-to-date market cap gain of 14%. This group includes industry leaders such as Green Thumb Industries, Trulieve Cannabis Corp., and Verano Holdings.
Trulieve and Grown Rogue International have been standout performers within this top tier, posting market cap increases of 81% and 142%, respectively, since the start of the year.
Viridian analysts attribute the outperformance of these companies to several factors:
Tight capital markets, with limited availability of funds and high costs for what is available.
Minimal pricing-in of potential benefits from federal marijuana rescheduling.
The ability to implement share buyback programs.
Better positioning to capitalize on expansion opportunities in key markets like Florida, Ohio, and Pennsylvania.
In contrast, the six weakest companies experienced a nearly 25% decline in their market caps year-to-date. That group includes firms such as Tilt Holdings, Gold Flora, and Red White & Bloom.
Source: Viridian Capital Advisors
The middle tiers showed mixed results, with some companies defying the overall trend. For instance, Glass House Brands (up 46%) and Goodness Growth Holdings (up 107%) both posted strong performances.
Viridian’s report comes as the industry awaits potential legislative changes that could reshape the market. While a majority of states have legalized marijuana for medical or recreational use, federal prohibition continues to create obstacles for companies operating in the sector. The status continues to limit access to traditional banking services and institutional investment for many operators.
Still, investors online have taken notice at some of the green they’ve been seeing in their pot portfolios lately.
“It almost feels alien to see the #cannabis tape green 3 out of the 4 days so far this week. $MSOS $GTBIF $TCNNF $AYRWF $MSOX,” Anthony Varrell, parter at Stonebridge Partners, wrote in a X (Twitter) post Thursday.
It almost feels alien to see the #cannabis tape green 3 out of the 4 days so far this week. $MSOS $GTBIF $TCNNF $AYRWF $MSOX
— Anthony Varrell (@V_arrell) June 27, 2024
“$MSOS is moving a month sooner than I expected, but that would make sense… They want to front run retail plebs / traders going into election season. Don’t sleep,” another user, @BasedInfinite, wrote.
$MSOS is moving a month sooner than I expected, but that would make sense… They want to front run retail plebs / traders going into election season. Don’t sleep
— Infinite (e/mso) (@BasedInfinite) June 27, 2024
Viridian noted that the market has priced in very little of the theoretical value of potential federal rescheduling of marijuana, suggesting that there could be significant upside if such changes occur.