Over the past few weeks, we’ve seen increased volatility in the stock market due to increased Covid-19 cases throughout the US. This sudden rise is causing investors to become more skeptical about the stock market rally.
Cannabis stocks have not been immune from this skepticism, as we’ve seen many names pullback, such as OrganiGram (OGI), from their recent highs.
In 2019 OGI saw highs of over $8 but since then the stock has fallen substantially to under $2.
Recently OGI provided the market with updates on multiple areas of their business:
- OGI recently completed its at-the-market equity program previously announced on April 22, 2020. The company issued an aggregate of 21,080,229 common shares for gross proceeds of approximately CAD$49 million. This program has been used by its peers in the cannabis sector in order to raise immediate capital but of course, carries immediate dilution to shareholders.
- There is also a lawsuit commenced in the Court of Queen’s Bench in Alberta, seeking damages against many of the largest Canadian cannabis companies (including OGI). This action is not certified and does not particularize the claims against OGI or the other companies. OGI’s policy states that the company does not comment on uncertain information but they are making this statement due to the questions in the market that may result from this action. OGI said they will continue to monitor this matter as it may develop.
- After OGI reviewing the perception around their Trailer Park Buds brand with Health Canada, the company is making some changes to its newly launched brand and logo. OGI will move to a modified version of the logo for the short term. In the longer term, the company is exploring options for a permanent logo and brand name combination for its large-format value brand. OGI will continue to have this large format value offering available in the market.
OGI is a Canadian Cannabis producer that has been on the decline but it does have some things going for it. Such as only C$295,000 in debt a decent cash position of C$41.2 million (and access to draw C$30 million from a term loan and C$25 million from a revolving loan).
However, it's revenue dropped 8% last quarter and they posted negative adjusted EBITDA of C$1.1 million. Therefore we are cautious on this company in the near-term.
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OGI shares . Year-to-date, OGI has declined -26.53%, versus a -4.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles.
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