Credit Check: What Does DEA Rescheduling Mean For Cannabis Credit Ratings? Big Companies' Risk-Return Profiles
Portfolio Pulse from Nicolás Jose Rodriguez
The DEA's rescheduling of cannabis to Schedule III has caused significant market volatility for multi-state operators (MSOs), with the MSO index initially surging by 25% and then dropping by 15%. Viridian Capital Advisors highlights the impact on MSOs' credit ratings and financial health, noting Green Thumb Industries' favorable deal, Trulieve's balanced risk-return profile, and the high yields but high risks for companies like Ascend Wellness, Verano, Cresco, and Curaleaf.
May 03, 2024 | 3:57 pm
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NEGATIVE IMPACT
Ascend Wellness faces high risk with a 13.7% yield on its $275M loan, constrained by high liabilities relative to its market cap.
The high yield reflects significant risk, and the high liabilities relative to market cap could restrain stock performance, indicating a potential short-term price decline.
CONFIDENCE 90
IMPORTANCE 85
RELEVANCE 90
NEUTRAL IMPACT
Cresco's trading yields in the 11-11.5% range highlight its risk profile and investment attractiveness.
Cresco's yield range indicates a higher risk investment, which could influence its stock price through investor perception.
CONFIDENCE 80
IMPORTANCE 60
RELEVANCE 60
NEUTRAL IMPACT
Curaleaf's yields in the 11-11.5% range suggest a higher risk but potentially rewarding investment.
The yield range for Curaleaf suggests a higher risk profile, which could lead to a more volatile stock price in the short term.
CONFIDENCE 80
IMPORTANCE 60
RELEVANCE 60
NEUTRAL IMPACT
Verano trades yields in the 11-11.5% range, indicating a higher risk and potentially more volatile investment.
The high yield range suggests a riskier investment profile, which could lead to increased volatility in VRNOF's stock price.
CONFIDENCE 80
IMPORTANCE 60
RELEVANCE 60
POSITIVE IMPACT
Green Thumb Industries secured a deal with a 7% return by April 2025, improving its position in Viridian's credit rankings despite higher costs.
The favorable deal indicates a strong financial position and investor confidence, likely leading to a positive short-term impact on GTBIF's stock price.
CONFIDENCE 90
IMPORTANCE 75
RELEVANCE 80
POSITIVE IMPACT
Trulieve's current yield at 8.7% suggests a more balanced risk-return profile, potentially attracting cautious investors.
The balanced risk-return profile indicated by the 8.7% yield could make TCNNF an attractive option for investors, possibly driving up its stock price in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 70