Only 2 American Cannabis MSOs Are NOT At High Risk Of Bankruptcy

The American Cannabis MSOs Index tracks the performance of the 13 largest pure-play vertically integrated companies. Below is the most critical financial information on the health of those companies:

  • the extent to which each company has a Positive Operating Cash Flow, if any,
  • their Altman -Z Scores
  • and the percentage probability that each companies with go bankrupt with the next 2 years.

The above information is presented below in descending order of financial health. You can also go here for the latest in analysis and commentary on each of the companies.

Below are the definitions for what a Positive Operating Cash Flow is and what an Altman Z-Score is:

  • Positive Operating Cash Flow is money coming in through sales minus operating expenses and a company doesn't survive without it and, as such, it is the best measure of a company’s financial and operational health. Where positive operating cash flow is not mentioned in association with a constituent in the list below it indicates that the company does NOT have positive operating cash flow.
  • The Altman Z-Score is a numerical measurement used to predict the chances of a business going bankrupt in the next two years compared to a company in a similar line of business and has an accuracy that ranges from 82% and 94%.  Companies with Z-Scores above 3.1 are generally considered to be stable and healthy with a low probability of bankruptcy. Scores that fall between 1.8 and 3.1 lie in a so-called 'grey area' with scores of less than 1, indicating the high probability of distress. Z Score is used widely by financial auditors, accountants, money managers, loan processers, wealth advisers, as well as day traders.

As mentioned above, companies with Z-Scores above 3.1 are generally considered to be stable and healthy with a low probability of bankruptcy and they are:

  1. Green Thumb (GTBIF)
    • has an Altman Z-Score of 5.6 with less than a 12% chance of experiencing financial distress Source
    • is the only MSO with a true Positive Operating Cash Flow (see here)
  2. Planet 13 (PLNHF)
    • has an Altman Z=Score of 5.4 with a 36% chance of experiencing financial distress Source

Companies with Z-Scores that fall between 1.8 and 3.1 lie in a so-called 'grey area' regarding financial stability and health and have a higher probability of bankruptcy, as follows:

  1. Curaleaf (CURLF)
    • has an Altman Z-Score of 1.8 with a 73% chance of experiencing financial distress Source

Companies with scores of less than 1 indicate that they have a high probability of distress are as follows:

  1. Cresco (CRLBF)
    • has an Altman Z-Score of 0.6 with a +74% chance of experiencing financial distress Source
  2. TerrAscend (TRSSF)
    • has an Altman Z-Score of 0.6 with a +74% chance of experiencing financial distress Source

The remaining 8 constituents in the American Cannabis MSOs Index have 0.0 Altman Z-Scores and the likelihood of going bankrupt ranging from over 70% to over 77%, as follows:

  1. Verano (VRNOF)
    • has an Altman Z-Score of 0.0 with a 70% chance of experiencing financial distress Source
  2. Trulieve (TCNNF)
    • has an Altman Z-Score of 0.0 with a +71% chance of experiencing financial distress Source
  3. Acreage (ACRDF/ACRHF)
    • has an Altman Z-Score of 0.0 with a 73% chance of experiencing financial distress Source
  4. Ayr (AYRWF)
    • has an Altman Z-Score of 0.0 with a +73% chance of experiencing financial distress  Source
  5. Columbia Care (CCHWF)
    • has an Altman Z-Score of 0.0 with a +73% chance of experiencing financial distress Source
  6. Jushi (JUSHF)
    • has an Altman Z-Score of 0.0 with a +77% chance of experiencing financial distress Source
  7. Ascend (AAWH)
    • has an Altman Z-Score of 0.0 with a +77% chance of experiencing financial distress Source
  8. Goodness Growth (GDNSF)
    • has an Altman Z-Score of 0.0 with a +77% chance of experiencing financial distress Source

The article Life Expectancy Declining At Some MSO Companies identifies the MSOs which seem to be at the greatest risk of default during the next 30 months as a result of them having huge debts coming due, negative free cash flows, and insufficient cash and the MSO that is in the best financial shape.


More By This Author:

Psychedelic Drug Stocks Index Up Slightly This Week
Decline In Plant-Based Food Stocks Index Slowed This Week
September Cannabis Category Performances Ranged From -6.3% To -39.0%

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