what happened
The WallStreetBets forum on Reddit is gaining more prominence this week, with reports on CNBC that the crowd behind recent short-press momentum names is targeting the marijuana sector.
Trading in the sector is volatile again today, with equities moving as of 10:00 a.m. EST:
Approximately
Cannabis shares have generally been rising since the beginning of the year, partly due to politics and hopes for more progress towards federal legalization in the US, and also due to growth in some of the underlying businesses, as well as consolidation, with Tilray set to combine with Africa (NASDAQ: APHA).
Today, shares are pulling back from the excessive gains on Wednesday, when Tilray rose 50%, OrganiGram 37% and Sundial Growers nearly 80%. The volatility was probably strongly influenced by the retailers focusing on the sector. But there is also industry news that investors can review.
Image Source: Getty Images.
Now what
As share prices have only risen over the past few weeks, Sundial took the opportunity to raise capital and thus increase the cash on its balance sheet. Although it is useful, especially since the company is not profitable, it costs the existing shareholders. The company’s market capitalization has risen more than 1,200% since the beginning of 2021, while the share price itself has risen by about 720%. Although both are large numbers, the difference shows the dilution that existing shareholders endured in the process.
Tilray had more fundamental reasons for its 2021 profit. This week, the company announced a new distribution deal in the UK to go along with other recently announced European expansions. It also recently said that it had exported its first medical cannabis shipment to Spain, and that it had received the first and only market authorization for medical cannabis products in Portugal. In addition to expanding business, Tilray has plans to combine with Aphria to sell the largest global cannabis company. Irwin Simon, CEO of Aphria, will lead the newly combined company that will retain the name Tilray.
OrganiGram shares have also more than tripled since the beginning of the year. It is the smallest of the three names with a market capitalization of just over $ 1 billion, and it is still not profitable. Last month, the company reported that the fiscal net income from the first quarter of 2021 from Canadian adult use for recreation grew by 30% compared to the previous year, although total net income decreased by 23%.
The anger of retailers yesterday seems to be easing today, but there are still a few things to keep in mind, especially as US legalization continues to expand, but investors need to realize that the dilution has taken place around the balance sheet of Support Sundial Growers. and the struggle for profitability that everyone experiences. Investors should focus on the underlying business, or dedicate any funds to the speculative portion of their portfolio.
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