This week's Viridian Valuation Tracker investigates the valuation metrics of Canadian cultivation and retail companies with market caps over $100M. The focus is on Canopy Growth (NASDAQ:CGC) and Tilray (NASDAQ:TLRY), both of which recently filed $250M At-The-Market (ATM) equity issuance programs.
ATM Programs & Stock Pressure
These programs allow companies to sell shares incrementally at current market prices, offering flexibility and potentially less pressure on stock prices than traditional equity issues. This is possible because ATM programs enable companies to sell shares directly into the market over time rather than all at once, aligning with market demand and conditions.
Canopy’s stock fell 8.45% following the ATM announcement, but, according to Viridian, the decline would likely have been steeper with a regular $250M equity issue.
“ATM programs do not produce the same amount of pressure on stock prices as an equivalent-sized issue would because the issuance will happen over time, and there is no assurance that the entire program will be executed. Canopy’s stock reacted negatively to the ATM announcement, falling 8.45%, but we wager the damage would be far more significant if the company announced a regular way equity issue of $250M. (Canopy’s market cap is roughly $700M, so a $250M issue would be huge),” reads the report.
Valuation Metrics Overview
Canopy's EV/2024 Revenue figures indicate a substantial value ascribed to its unconsolidated U.S. operations. According to the report, this reflects investors' hope that U.S. operations will offset Canopy's inability to achieve positive EBITDA since Canadian legalization. However, the recent poor performance of Acreage casts doubt on these prospects.
Tilray's EV/2024 EBITDA is notably high, suggesting market optimism for better future performance. While high, its EV/2025 EBITDA of 13.89x indicates moderated expectations.
Market-To-Book Ratios
Both companies trade at premiums to the group's market-to-tangible book value median.
Canopy's market-to-book ratio, close to its market-to-tangible book ratio, indicates extensive write-downs of intangible assets. Conversely, Tilray's low market-to-book but high market-to-tangible book ratio signals market skepticism about the value of its many acquisitions.
Stock Performance
Year-to-date stock performance shows Canopy as the best performer in the group. Canopy's better performance is attributed to its acquisition of U.S. plant-touching companies into Canopy USA. Tilray, however, has yet to make significant U.S. investments.
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