Prices Falling For Cannabis Companies

Once upon a time, owning a cannabis company seemed like a sure bet. Even if you couldn’t make the business work, there was always an option to sell it. So many people have been desperate to get into the cannabis industry that they were willing to pay just about any price. In other words premium prices regardless of whether the business warranted it or not. Now as the bear market in stocks seems to have some staying power and competition in some cannabis markets is heating up, prices for these businesses is dropping.

Body & Mind

The latest price cut is Body and Mind Inc. (CSE: BAMM) (OTCQB: BMMJ) cutting the price it is paying on the Seaside dispensary purchase agreement. The company, through its wholly-owned subsidiary, DEP Nevada, Inc. agreed to buy the Reef dispensary in Seaside California on November 30, 2021, and has been operating the dispensary since December 1st, 2021. DEP has executed the first amendment to drop the cash purchase price of the transaction and to issue shares of common stock having the same value as the cash reduction. The transaction has been changed to reduce the cash purchase price from $2.5 million to $1.25 million. Instead, the company will issue $1.25 million worth of shares. The Body & Mind stock price has fallen from roughly 32 cents at the beginning of 2022 to recently selling at approximately 13 cents per share.

“The combination of our recent debt extension, pausing our Michigan cultivation and reduced cash payment for the Seaside dispensary are designed to strengthen the Body and Mind balance sheet for future development,” stated Michael Mills, CEO of Body and Mind. “We continue to focus on our cultivation, manufacturing, and retail operations as we expand our brand and wholesale business and develop new strains and innovative products.”

HEXO

Last week, HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) announced that it changed its agreement with Tilray Brands, Inc. (Nasdaq | TSX: TLRY) and HT Investments MA LLC. Citing specifically “current stock market conditions”  the three companies agreed to reduce the minimum liquidity interim covenant and closing condition from $100 million (approximately C$129 million) to  $54 million (approximately C$70 million.) The press release also kept mixing currencies throughout the announcement making it confusing for readers and forcing continuous currency conversion calculations to understand what was happening. For example, the press release wrote, “reduce the Amendment Share Price (as defined in the Transaction Agreement) from $0.54 to C$0.40.” Using a currency calculator, the price cut is really dropping from 54 cents to 30 cents, but if you switch in the Canadian dollar amount it doesn’t look as bad.

“The strategic partnership with Tilray Brands significantly improves HEXO’s capital structure and provides the opportunity to accelerate our growth in global markets,” said Charlie Bowman, President & CEO of HEXO. “Challenging stock market conditions have necessitated amendments to the agreement, but this is a critical step in unlocking the shareholder value held within the Company.”

Deals Are Down

According to Viridian Capital Advisors, as of May 4, 2022 only 84 M&A (merger & acquisitions) deals have occurred year-to-date versus 120 in 2021. Overall, the combination of debt and equity capital raise deals for 2022 only adds up to $1.9 billion versus 2021’s total of $5.8 billion for the same time period. 2022 has only seen 99 capital raise deals versus 2021’s 208 deals. Considering the country was still under the cloud of Covid, the numbers for 2021 are pretty impressive.

Putting the blame on stock prices is definitely relevant, but cannabis stock prices also tumbled in 2021. The year started strong in 2021, but stocks plunged after February and never recovered. A hopeful outlook that stock prices would eventually recover may have fueled the optimism of 2021 – only it never happened. The cannabis ETF Advisor Shares Pure U.S. Cannabis  (NYSE: MSOS) is down 54% year-to-date and is down 71% from its 52-week high.

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


Leave a Reply

Your email address will not be published. Required fields are marked *

Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

We respect your privacy. See our privacy policy.


About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


READ MORE



Recent Tweets

@GreenMarketRpt – 22 hours

We are stoked to open up nominations for the 1st ever GMR Cannabis Tech Awards. They will be announced at the GMR T…

@GreenMarketRpt – 1 day

Flower One’s Revenue Drops In Fourth Quarter, Restructures Debt Payments

@GreenMarketRpt – 1 day

SPACS Losing Their Mojo As Deals Get Pushed Out

Back to Top

Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

We respect your privacy. See our privacy policy.