Marc, following your line of thought here I did some analysis of the capabilities of cannabis companies to LBO. A chart I publish weekly in the viridian deal tracker bears directly on this question. It graphs ev/2024 ebitda against adjusted net debt/2024 ebitda. The best candidates should be those with both low valuation and low leverage. For adjusted net debt, I take total debt including leases and add any tax liabilities over 90 days of tax expense. (I include the new long term liability accounts companies have been creating to house their 280e liabilities in case the IRS decides it wants its money back). I have previously concluded that 3x debt/ ebitda is unsustainable in a 280e world, but assuming it goes away and suspending a bit of disbelief, I take 5x 2024 ebitda less existing debt to approximate how much companies could raise for share buybacks. I then divide that number by market cap to get a percentage of stock that could be repurchased. The top two candidates. Trulieve and Verano only registered at 66% and 69% with all major SSOs and MSOs lower. So the point is, even if the capital markets were accepting, none of them have the incremental debt capacity to do an LBO without significant outside equity investment. That is not to say that smaller buybacks in the cass above like Verano, don’t make sense. I think they do. But LBOS are off the table at current cash flows and equity values
Marc, following your line of thought here I did some analysis of the capabilities of cannabis companies to LBO. A chart I publish weekly in the viridian deal tracker bears directly on this question. It graphs ev/2024 ebitda against adjusted net debt/2024 ebitda. The best candidates should be those with both low valuation and low leverage. For adjusted net debt, I take total debt including leases and add any tax liabilities over 90 days of tax expense. (I include the new long term liability accounts companies have been creating to house their 280e liabilities in case the IRS decides it wants its money back). I have previously concluded that 3x debt/ ebitda is unsustainable in a 280e world, but assuming it goes away and suspending a bit of disbelief, I take 5x 2024 ebitda less existing debt to approximate how much companies could raise for share buybacks. I then divide that number by market cap to get a percentage of stock that could be repurchased. The top two candidates. Trulieve and Verano only registered at 66% and 69% with all major SSOs and MSOs lower. So the point is, even if the capital markets were accepting, none of them have the incremental debt capacity to do an LBO without significant outside equity investment. That is not to say that smaller buybacks in the cass above like Verano, don’t make sense. I think they do. But LBOS are off the table at current cash flows and equity values