Viridian Capital Advisors today released its 2015 Cannabis Industry Report and Stock Index.
The Viridian Cannabis Stocks Index declined 32.4% for 2015, underperforming the Dow Jones Industrial Average (minus 2.2%); Standard & Poor’s 500 (minus 0.7%); and Russell 2000 index (minus 5.7%). The decline follows a strong 2014, when the Index gained 383.5%. The disappointing year-end number is in contrast to the Q1 2015 strong start when it gained 23.6%.
In a release Viridian analysts attributed the industry’s poor performance to:
Unsustainable Valuations: A ‘Return to Fundamentals,’ as unsustainable valuations, along with smarter-money coming into private placements, are driving down investor terms and valuations.
Lack of Liquidity: The lack of liquidity for most public cannabis companies hurts their ability to close common stock financings, instead relying on highly dilutive convertible debt and equity line structures.
Weak Balance Sheets/Cap Tables: The fact that many companies came public via reverse mergers, and rely on dilutive structures to finance operations, has created poor cap structures and balance sheets.
The index is comprised of 50 of the more than 250 public companies within 12 sectors of the U.S. and Canadian cannabis marketplaces that meet certain benchmarks in regard to market capitalization, trading characteristics and U.S. Securities and Exchange Commission filing requirements.
According to the release, the top performing sectors for 2015 were Cultivation & Retail, up 167.4%, and Infused Products & Extracts, up 17.9%. This performance is indicative of the growth in the number of cannabis grows and dispensaries in existing/newly legal states, and the resulting revenue and market share growth of the underlying companies in these sectors.
The top performing stocks were OrganiGram Holdings Inc. (TSXV:OGI), the only New Brunswick-based licensed producer of medical cannabis in Canada, up 291.7%, Canopy Growth Corp. (TSXV:CGC), Canada’s largest licensed producer, up 83.3%; and American Cannabis Company, Inc. (OTCQB:AMMJ), a business-to-business consulting solutions provider, up 80.6%.