HRVSF - Cannabis Companies In Peril: Risks Of Insolvency Across The U.S. Cannabis Sector

None of these cannabis companies have had a single free cash flow positive quarter since the second quarter of 2018. Source: The Growth Operation U.S. Cannabis Company Comparison.

Cash is Limited

Cannabis companies in the United States are in a difficult situation. Cannabis is federally illegal, leading to very high effective tax rates due to 280E taxation. Because of how these taxes are calculated, even unprofitable companies are paying hefty tax bills. These costs and ramp-up costs force most cannabis companies to rely on capital markets for funding.

Capital markets are much less willing