Assessment of cannabis stocks with a view to liquidation
For an industry that was already struggling to survive falling stock prices and the virtual closure of capital markets, it is difficult to overstate the impact of the coronavirus market collapse.
Between the close of trading on February 20 and Thursday, when many global equity markets were hit by declines once per generation, the BI Global Cannabis Competitive Peers Index fell 43%, dropping 12-month down to around 81%. .
One may wonder what impact the rapid spread pandemic will have on income - all of these anxious housebound people could be very good at selling weed but that may be too little, too late for some companies that already lacked money.
“We believe that investors' attention to cannabis has focused on reducing the harms; in other words, to assess cannabis stocks from a liquidation perspective, by simply comparing market capitalization to net cash balances, "said CIBC analyst John Zamparo in a note released on March 11.
The fact that some companies are exploiting the markets at this tense and volatile time indicates a level of despair. Tilray Inc. shares plunged 32% on Friday after announcing plans to raise $ 90,4 million through a registered offer of shares and warrants. The offer was priced at $ 4,76, well below Thursday's closing price of $ 5,95.
The sale "reinforces the serious challenges it faces in managing the conditions of the weak legal cannabis market in Canada with tense finances," said analyst at Bloomberg Intelligence, Kenneth Shea. "Asset sales could also soon be on the table to increase its strategic concentration and its liquidity."