A Silly Cannabis Stock Move

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 no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

I was never a fan of Agrify (NASDAQ: AGFY), which went public in early 2021 near the top of the cannabis market at $10. Of course, with reverse-splits, that price was much higher effectively. Even with the very big rally recently, it is down a lot from the IPO price and the all-time high set later in 2021:

The stock closed at $38.76 last night, which left it up 106% year-to-date, but  a shorter chart shows just how much it has increased lately:

The stock, which bottomed in October at $2.71, was up by 1192% from the close at the end of October of $3.00.  The last capital raise before the private placement today was done in February at $0.38 per share. This was effectively $5.70 after taking into account a 15-1 reverse-split in early October. They had also priced a reverse split of 20:1 in July 2023 and 10:1 in October 2022. These three reverse-splits made the IPO price effectively $30,000.

The big news recently was that the company raised money from GTI and from Ben Kovler, who is the Chairman of the Board and Interim CEO. Agrify raised $10 million through a convertible note earlier this month. This was a lot for a company with just 1.53 million shares outstanding as of 11/14. The Lender, RSLGH, a subsidiary of Green Thumb Industries, committed to up to $20 million of a convertible note with a conversion price of $3.158. That’s a lot lower than the adjusted IPO price!

The stock is much lower in the pre-market trading today, though near $30 is substantially higher than where the company recapitalized with that convertible note. The share-count is much higher now with the 1.16 million shares raised though the private placement at $22.30. Fully-diluted in-the-money shares are approximately 9 million, giving it a market cap at $29 of $261 million.

Investors like and respect Ben Kovler, and for good reason, but this is a little too much faith in a good outcome. Green Thumb Industries is down 15% in 2024 so far, which is a larger decline than the NCV Global Cannabis Stock Index, which has dropped 9.1%. Agrify is attempting to become a beverage provider with its pending acquisition of Señorita, which it expects to close by the end of the year. I like this idea generally as I wrote in late August here, discussing the threat and opportunity THC from hemp could provide.

I am not predicting failure for Agrify, but the stock seems overdone in the short-term. I continue to believe that THC beverages sold nationally and not through dispensaries could be a great product idea, but it’s too early for investors to chase this idea. I am very bullish and am glad to see a cannabis stock soaring, but there are so many better ideas than Agrify.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Exclusives

Michigan Cannabis Sales Growth Was Slow Again in October

Capital Raises

Agrify Raises $25.9 Million at Big Discount

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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