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Viridian Releases New Cannabis Industry Report and Stock Index

Cannabis Stocks Will Get More Institutional Funding in ’15 and M&A Activity Will Rise
More Companies Will Fail as Shake Out Continues

(New York, N.Y., February 24, 2015) — Viridian Capital & Research (www.viridiancr.com), a New York City-based firm that is the first investment banking/strategic advisory platform dedicated to the Cannabis sector, has published its second industry report.  The Viridian Cannabis Industry Report and Stock Index is a unique resource that tracks and evaluates the emerging public markets for cannabis companies.  Our current report looks back at the key events impacting public Cannabis companies in 2014, and the key challenges and opportunities for these companies in 2015.

More institutional capital will flow into public cannabis companies this year, reflecting the sector’s growth prospects, but some individual companies will falter as investors and regulators demand performance, Viridian Capital & Research concludes in its new report.

“The backdrop and general momentum of the cannabis sector is positive as the reality of its national growth potential becomes more and more apparent,” says Viridian President Scott Greiper. “But at the same time, the shake out of individual players that began last year will continue in 2015, as hype will not be enough to sustain companies in the eyes of investors, and may contribute to action by regulators. We will likely see a number of public cannabis companies fail this year. With increasing flows of ‘smart money’ will come increasing demand for companies to demonstrate top-tier management and sustainable business models.”

2014 certainly was a shake out year for public Cannabis stocks, with over-valuations and a “return to fundamentals” overtaking a strong start to the year. The Viridian Cannabis Index gained 38.4 percent for 2014, significantly outperforming the DJIA, S&P 500, Nasdaq and Russell 2000.

However, nearly all of the gains came in the first quarter, when our Index rose 938.6 percent. In Q2’14, the Viridian Index gained just 2.8 percent before tumbling by 33.3 percent in Q3’14, and 32.1percent in Q4’14.

The industry is undergoing a shakeout on a fundamental basis due to its early stage nature and general lack of executive experience. Some key company opportunities and challenges we observe, include:

  • Poor balance sheets and toxic financing structures are pressuring stock prices and hurting companies’ ability to raise capital.  We expect a number of public companies to delist.
  • Core business fundamentals are still evolving — business models, pricing, budgeting, management/board depth, reporting standards, best practices – creating execution risk.
  • M&A activity will increase in a chase for market share and brand leadership, propping up valuations. We expect the strategic acquirer to emerge in 2015.
  • The institutional investor will increase exposure to the cannabis market in 2015, attracted by strong industry growth rates, rationalized business models and reduced valuations.

To obtain the full report including the public companies in the Viridian Cannabis Stock Index, or to find out more information about any company listed in the report, please visit: www.viridiancr.com/industry-report, contact Michael Swartz at [email protected] or call 212-333-0257.

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