Index Performance for the Week Ended March 10, 2017
The Viridian Cannabis Stock Index fell 3.4% in the tenth week of 2017 ended March 10th, following declines in the two weeks prior. The Index remains up 13.8% for the year.
Extended valuations are a concern as the median Price (Market Cap) to Sales multiple for the Index was 40.1x as of March 10th. White House Press Secretary Sean Spicer’s comments have added some uncertainty to market forecasts, further illuminating the high Price-to-Sales multiple for the Index.
For the week, four of the twelve Index sectors showed positive gains. The top performing sectors were Physical Security (up 1.8%), Agriculture Technology (up 1.2%), and Biotech/Pharma (up 1.0%). The worst performing sectors were Investment/M&A (down 10.1%), Real Estate (down 7.5%), and Cultivation and Retail (down 7.2%).
The Ancillary Products & Services segment continues to outperform the “Touching the Plant” segment, up 19.3% vs. 9.2% YTD. The outperformance is likely due to the fact that ancillary providers are perceived as “lower risk” than those companies that “Touch the Plant” and are more directly subject to State and Federal oversight. High valuations and some market uncertainty may cause movement of investors towards lower risk segments of the market.
Weekly Snapshot: Index Median Price-to-Sales (P/S) Multiples
Note: The multiples are calculated by dividing the market capitalization of each security in the Index at close of market on final trading day of the week by their respective trailing-twelve-month (TTM) revenue figures (pulled from the four most recent quarters). These multiples are then categorized based on the companies’ segment/sector in the Index, and the median multiples from these groups are pulled for the snapshot.
The median P/S multiple for the Index was 40.1x as of March 10, 2017, a slight decrease from 42.2x as of March 3, 2017 but an increase from 39.5x as of February 24, 2017.
The decrease in multiples from March 3 to March 10 was largely due to the Index’ decline in the face of Spicer’s comments.
The increase in multiples from the previous two weeks is due to new financial information that has been filed and released over these past few weeks. Updated data detailing revenues and shares outstanding has led to upward changes in multiples even while stock prices in the Index have fallen.
Index Performance Year-to-Date (YTD)
Dollar Volume
Dollar volume in the Index started strong in 2017 but declined late in the first week of trading, adding further evidence to the January Effect as investors completed much of their repurchases in the first few trading days of the year. Through the second week of the year, dollar volume in the Index remained at similar levels as were seen in the first week.
For the third week of 2017, dollar volume in the Index was low on January 16 due to Martin Luther King, Jr. Day in the United States but normalized on January 17 to between approximately $75 and $125 million dollars per day as the U.S. markets reopened and the Index continued appreciating.
Through the fourth and fifth weeks of the year, dollar volume in the Index slid from approximately $125 million to $75 million as a handful of the more highly traded stocks in our Index saw reduced trading volume.
Dollar volume in the sixth week of 2017 was the highest we had seen YTD, with nearly $825 million traded between February 6 and February 10. This was also the first week of the year thus far wherein daily dollar volume was above $125 million on every day of the week.
Dollar volume in week 7 surpassed that of week 6, setting a new YTD record of over $971 million traded, 17.8% more than in the week prior. Additionally, a new single-day YTD dollar volume record of nearly $254 million was set on February 15.
Average daily dollar volume in week 8 was similar to that of weeks 6 and 7, but total dollar volume was lower due to the Presidents’ Day holiday in the United States. Dollar volume rose on Friday, February 24 due to a sell-off triggered by Sean Spicer’s comments, but abated slightly at the beginning of week 9.
Week 9 began with dollar volume greater than was seen at the beginning of the year ($75 to $125 million per day) but less than was seen in the beginning and middle of February ($125 million+ per day).
Dollar volume continued its slightly downward trend going into week 10, with $720 million traded in the week ended March 10 compared to $740 million the week prior. On March 8, dollar volume spiked to nearly $200 million, primarily driven by increased trading in the Canadian stocks in the Index.
The performance of the Viridian Cannabis Stock Index, as a whole and by sector, as well as in comparison to several major market indices, is detailed in the table below:
To learn more about the Viridian CANNABIS STOCK INDEX, contact:
Harrison Phillips
Viridian Capital Advisors, LLC
(212) 209-3086
[email protected]
*Disclaimers
The information contained herein is for informational purposes and is not intended as a research report. It should not be construed as Viridian recommending investment in cannabis companies or as a solicitation to buy or sell any security or engage in a particular investment strategy. Investment in cannabis companies entails substantial risk. Before acting on any information, you should consider whether it is suitable for your particular circumstances and consult all available material, and, if necessary, seek professional advice.
Viridian Capital Advisors and its affiliates, as well as their respective partners, directors, shareholders, and employees, may have a position in the securities mentioned herein and may make purchases and/or sales from time to time. Viridian Capital Advisors, through broker-dealer services provided by Pickwick Capital Partners, LLC, Member FINRA/SIPC, may act, or may have acted in the past, as a financial advisor for certain of the companies mentioned herein and may receive, and may have received, a remuneration for their services from those companies.
About the Viridian CANNABIS STOCK INDEX
The Viridian Cannabis Stock Index tracks the performance of approximately 50 publicly traded cannabis companies that meet three of the following four filter criteria:
- Market capitalization ? 10,000,000 USD
- Average daily trading volume ? 20,000 USD
- Float ? 25% of shares outstanding
- Financials filed on time in last 6 months
Stock performance is categorized into 12 different product/technology sectors that comprise the core business segments within the legal cannabis industry. These sectors are further differentiated into two segments, those that “touch the plant” and those that are providers of ancillary products and services.
Our Index is NOT a tradable or investable instrument and is not intended to be deemed or treated as such. All data and information contained in the Index is for reference and/or informational purposes only.
The above information, whether in part or in its entirety, neither constitutes an offer nor makes any recommendation to buy or sell any securities.
About Viridian Capital Advisors, LLC
Viridian Capital Advisors is a is a financial and strategic advisory firm dedicated to the cannabis market. We are a data- and market intelligence-driven firm that provides investment banking, M&A, corporate development, and investor relations services to emerging growth companies and qualified investors in the cannabis sector. Our banking practice, through broker-dealer Pickwick Capital Partners, Member FINRA/SIPC, provides capital and M&A to fund the growth of our clients, while our advisory practice helps to position and build their businesses. Our team’s decades of high level operating and transactional experience on Wall Street in a variety of emerging sectors, allows Viridian to provide comprehensive strategic and financial solutions that assist cannabis enterprises in realizing their full potential.
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