The Delisting Risk

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.

Friends,

While this has been a tough week for MSOs, which spiked early but then pulled back sharply on Thursday, cannabis stocks have performed very well this week so far. The NCV Global Cannabis Stock Index has rallied more than 1% so far, but the performance has been driven mainly by the Canadian LPs in the index. None of the five Tier 1 MSOs are up so far in April as of Thursday’s close, while four Canadian companies have been double-digit percentage gainers.

The one Canadian LP that is down so far in April is Organigram, which priced an equity offering in late March that closed this week. It is better to be lucky than smart, but I had no position in my model portfolio at 420 Investor when the deal was announced. It is now one of my largest positions again. It is up a lot in 2024 so far, but it looks good compared to the larger LPs and trades at tangible book value. We did say here to be careful in Canada right before that deal was priced! Next week, Tilray Brands reports its fiscal Q3, and we reiterate our caution.

We have been telling our readers here about Organigram for a while. We even bragged a bit three months ago about how our research paid off. Since then, Organigram has rallied 56%.

I moved 420 Investor to Seeking Alpha in 2023, and one of the things I have done there is to add what they call a basic service, which offers some of the full service features. I call this The Big Picture, and it includes the monthly newsletter and a weekly update. In January, I began to implement a Seeking Alpha feature, Top Picks. I shared my first three without realizing their connection. Those stocks were WM Technology, Hydrofarm and Village Farms. I have closed all of those picks very profitably. I have also closed GrowGeneration profitably. There are two stock picks that remain open.

The connection between my first three picks shared is that they all trade on the NASDAQ and are facing potential delisting. The NASDAQ has a minimum price of $1, and companies that are warned have time to get the price above $1 for ten straight days. One stock that faced this risk and persevered was SHF Holdings. There was insider buying that helped fuel the rally. The stock fell after it temporarily removed the delisting risk. We discussed the insider buying at SHF Holdings and several others in December.

Companies can typically execute a reverse-split to avoid delisting, but this doesn’t always work. Greenlane did a reverse-split and retained its listing, but then it broke below $1 again and had to do a second reverse-split. A worse example is CEA Industries, which will move back to the OTC in a few days. Their shareholders voted against the company doing a reverse-split. springbig is another ancillary cannabis company that moved from the NASDAQ to the OTC. I included these companies on my Focus List in the past, but I no longer do.

I don’t think that reverse-splits are necessarily a bad thing. Some investors fear them, though, and I am aware of this. The only negative is that it can be easier to short a stock that trades at a higher price.

While I have removed three of my prior Top Picks, I still own Village Farms and a lot of Hydrofarm in my model portfolio. I remain optimistic for WM Technology, especially if 280E goes away, but I am on the sidelines for now. The stock is up more than 72% so far this year, and the company hasn’t yet released its 10-K for 2023.

Readers should be aware of the volatility in stocks that are facing delisting and also understand that a reverse-split isn’t necessarily a bad thing. Organigram did one, and look at it now!

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusive Articles

Capital Raising

Imperial Brands Sticks with Auxly but Takes Big Hit

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

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View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

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Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email