The Viridian Capital Credit Ranking Model is a powerful tool for navigating the complex landscape of the cannabis industry. This model, unlike traditional credit rating systems, provides a comprehensive assessment of cannabis companies’ creditworthiness, addressing a significant gap in financial data for this rapidly growing sector.
The model utilizes eleven bespoke financial and market variables to dissect four critical credit factors: Liquidity, Leverage, Profitability, and Size. These factors are weighted to arrive at a credit score and credit rank. One of the key strengths of the Viridian model is its dynamic nature. It leverages market equity prices, which makes it responsive to real-time information that drives stock prices, unlike traditional ratings that remain fixed between earnings releases. This dynamism makes the model a valuable tool for both debt and equity investors.
The Viridian model acts as a substitute for the credit ratings that are not yet available for cannabis companies, offering a valuable selection and monitoring tool. The model is also a powerful resource for making informed decisions regarding capital allocation and M&A strategies.
Recent updates to the model have incorporated several new metrics, offering deeper insights into the unique financial landscape of cannabis companies. For instance, the model now includes adjusted net debt, taking into account accrued and unpaid 280e taxes and lease obligations, offering a more accurate picture of a company’s true financial position. It also incorporates adjusted EBITDAR, which considers rent expense, providing a more unbiased profitability measure, regardless of whether a company finances itself through leases or debt.
The Viridian model is a continuously evolving tool, with ongoing improvements in development. The model developers are currently exploring the addition of indicators for management changes, late financial statements, and an explicit consideration of the volatility of the market cap. Feedback and suggestions from users are welcomed, further enhancing the model’s accuracy and relevance.
The Viridian Capital Chart of the Week is a valuable resource for investors, highlighting key investment, valuation, and M&A trends from the Viridian Cannabis Deal Tracker. The Deal Tracker is a proprietary information service that tracks capital raise and M&A activity across the legal cannabis, CBD, and psychedelics industries, providing crucial market intelligence. It segments deals by industry sector, deal structure, status of the company, and key deal terms, offering valuable insights into the market.
Since its inception in 2015, the Viridian Cannabis Deal Tracker has become an indispensable tool for investors, tracking and analyzing over 2,500 capital raises and 1,000 M&A transactions, representing a total value exceeding $50 billion. The Viridian Capital Credit Ranking Model, in conjunction with the Viridian Cannabis Deal Tracker, provides investors with a robust set of tools for understanding the dynamics of the cannabis industry and making informed investment decisions.
