When assessing a company’s worth, investors often focus on basic financial figures. However, a deeper dive reveals that hidden debt can significantly alter our perception of a company’s true value. Viridian Capital Advisors, a leading financial firm, emphasizes the importance of considering these overlooked liabilities, shedding light on a critical aspect of financial analysis.
Viridian’s approach to valuation goes beyond traditional methods by factoring in lease obligations, overdue tax payments, and long-term tax liabilities that companies have yet to address. This comprehensive approach results in a higher debt figure, leading to revised calculations that can reveal a different picture of a company’s value.
The impact of this meticulous analysis can be significant. Companies that initially appeared cheap may actually be less undervalued than previously believed, particularly those burdened by substantial lease or tax liabilities.
Take, for example, Planet 13 Holdings (PLNH) and MariMed (MRMD). These companies, initially perceived as undervalued based on traditional EV/EBITDA multiples, experienced a significant valuation increase when Viridian Capital’s augmented EV calculations incorporated hidden debt. This reveals that investors who overlook these liabilities might mistakenly view these companies as more attractive investments than they truly are.
In contrast, companies like Schwazze (SHWZ), Vext Science (VEXTF), and Green Thumb Industries (GTII) demonstrate minimal changes in valuation, suggesting cleaner balance sheets that could bolster investor confidence. These companies have likely addressed potential liabilities, making them appear more financially sound.
The implications of hidden debt extend beyond individual companies. Recognizing and addressing these liabilities is crucial for making informed investment decisions and ensuring a more accurate understanding of the cannabis industry’s financial landscape.
