SOL Global Reports $51 MIllion Loss

SOL Global Investments Corp. (CSE: SOL) (OTCPK: SOLCF) delivered its second-quarter results in Canadian dollars with a net loss of $51.3 million loss and no revenues only a loss of $57 million versus last year’s loss of $17 million for the same time period. The second quarter of 2018 also experienced a net income of $179 million due to the gain on the sale of a subsidiary.

In the last six months, SOL Global has recorded a net loss of $94 million or $1.75 per share. The company noted that 78% of this loss is due to SOL Global’s investment in Verano Holdings Inc. “Early in 2019, Verano announced a merger agreement with the public company Harvest Health & Recreation Inc. As a result of this merger agreement, the price of the company’s investment in Verano is linked to the value of the underlying Harvest shares that the company will receive should the publicly announced merger close. As the value of the Harvest shares decreased significantly from April 1, 2019 to September 30, 2019, the company recorded an unrealized loss of $74.2 million on its Verano investment. The remaining loss is primarily attributed to changes in the Company’s other cannabis-related investments.”

“We are disappointed in the volatility of certain core portfolio holdings which had a significant negative impact on our NAV, however, we continue to stand by those investments and their long-term value creation,” said CEO Brady Cobb. “Our stock has had a larger decline than others but traditionally an investment holding company trades at a discount to operating companies. That, coupled with 1 or 2 of our core holdings having larger price declines than expected due to HSR delays has had the majority of impact on our NAV decline.”

Confusing Acquisition Plans

In addition to the big losses, SOL Global has shifted gears with its acquisitions causing investors to lose track of what exactly the company is planning to do. SOL Global stated that it still intends to complete a transaction for the sale of 3 Boys Farms, LLC within 2 years of the closing date of its acquisition. “In the event that a sale of 3 Boys Farms, LLC does not occur within the two-year timeframe, only then would the Company be required to compensate the former CannCure shareholders US$80 million.” SOL was going to sell 3 Boys to Verano, but when Verano said it was buying Harvest Health, it didn’t need a Florida property and so that agreement was terminated.

The company also recently terminated the plan to acquire MCP Wellness, which would have given the company a large presence in Michigan, which just began recreational sales on Dec. 2.

Video Gaming?

Adding to the confusion is the company’s investment in a video game business. Two of SOL Global’s non-cannabis investments, Torque Esports Corp. (TSX-V: GAME) of which the company presently owns 9% of its shares, and Frankly Inc.  (TSX-V: TLK) of which the company presently owns 13.8% of its shares, have agreed to merge with a third company, WinView, Inc. in a triple-merger. The combined entity will be called Engine Media Holdings, Inc. with the plan to form integrated news, gaming, and esports platform. WinView Executive Chairman Tom Rogers, best known for founding CNBC and then CEO of TIVO, will serve as Executive Chairman of the new entity.

If shareholders were wondering whether this should be looked upon as a way to diversify risk, SOL Global shot that down by adding, “There are no assurances that the proposed transaction will be completed or at all.”

More confusing is that SOL Global also filed an early warning report in connection with a disposition of common shares of Frankly Inc. and also stated that it sold 103,500 common shares of Torque Esports resulting in SOL Global becoming a beneficial holder of less than 10% of the shares receiving approximately $ 130,864.

Cobb added, “This deal, which was brought together by our investment team, illustrates our strength in recognizing value in individual assets but also the foresight to cohesively align and bring investments together in order to maximize shareholder value by looking outside of the box. The esports industry marketing size is set to surpass the $1billion dollar revenue mark in 2019 according to NewZoo at a time when streaming is taking over cable providers. I’m personally excited to see this investment play out and am proud of our investment team for finding the opportunity in both Torque and Frankly and bringing them to another level. ”

Heavenly Rx To NASDAQ

SOL Global owns 40.7% of Heavenly Rx Ltd. which has signed a memorandum of understanding with the NASDAQ exchange. Heavenly is supposed to a reverse takeover of Therapix Biosciences Ltd (NASDAQ: TRPX), a specialty clinical-stage pharmaceutical company with a portfolio of technologies and assets based on cannabinoid pharmaceuticals. However, SOL also made sure to note that there also no assurances this deal would come to completion.

In October the company said it was changing its name to Bluma Wellness, but so far the board hasn’t voted to approve the name change.

Shareholders are apparently comfortable with the losses as the stock moved higher by 3% to trade at roughly 34 cents.

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.

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