THIS week has seen European cannabis stocks once again gain momentum in the face of dismal economic news.
In the UK this week, news broke that inflation had outpaced forecasts in July to hit 10%, while the Bank of England is expected to double interest rates over the next six months in a bid to dampen rising prices.
While the news hit markets across Europe and saw the FTSE 100 drop 20 points, more cannabis stocks made gains than made losses this week, with a number once again posting double digit increases.
Chill Brands
Chill Brands made some much-needed gains this week, seeing its stock skyrocket nearly 50% on news of a new partnership in the US.
The CBD brand became the latest UK listed cannabis stock to stage a comeback this week, following a dismal few months trading at historic lows since April.
On August 18, Chill unveiled a new brokerage agreement with Bellator Group, a specialist CBD product distribution and brokerage firm based in the US, a key target market for the company.
This agreement will see Bellator work with Chill to ‘gather more accurate data, and swiftly adapt its sales plans to improve the uptake of Chill products by retail buyers and consumers’.
“Bellator will also market Chill’s CBD range and potential future product extensions to its wider network of retail contacts.”
Investors have reacted so enthusiastically, seeing shares jump from 2.3p last week to 3.4p at the time of writing, amid hopes the new agreement could help rectify the company’s disappointing performance in the region so far, a key element of its poor stock performance.
In 2020, Chill signed a deal with The Asian American Trade Association Council to have its products rolled out to 88,000 stores across the US, setting a timeline for this to occur over the coming year.
Following numerous delays, due to the pandemic and a complex relationship with its distribution partner, Chill announced that it was scrapping its roll-out timeline entirely in February this year, placing its focus on other sales channels instead.
The AATAC deal was a significant draw for investors, seeing it achieve its highest market cap to date weeks after it was announced, and its share price has struggled to gain any traction since it was all but scrapped earlier this year.
While its brokerage deal makes no reference to a renewed distribution agreement, its CEO Callum Sommerton says he believes their ‘product expertise’ is needed to ‘scale in-store CBD sales’.
IM Cannabis
IM Cannabis is inching closer to being delisted from the NASDAQ stock exchange after its stock fell by 23% this week.
In mid-July, BusinessCann reported that IM Cannabis had received a ‘notification letter’ from the NASDAQ Stock Market LLC warning that if its stock price did not return above $1 by January next year, it could face delisting.
After seeing its stock rise 32% last week to hit $0.83, the release of its Q2 financial results earlier this week has seen its share price drop back 26% to $0.48.
On August 15, the company revealed its financial results for the three months to June 30, 2022, reporting a 114% year-on-year revenue increase to C$23m.
The global cannabis company, which has operations across Israel, Germany and Canada, said that while it managed to slightly reduce its EBITDA losses from C$5.7m to C$4.6m, its net losses skyrocketed 278% to $18.98m compared with the same period a year earlier.
This spike in losses was in part due to ‘non-cash charges of C$5.4m, related to restructuring activities in Canada and Israel, along with associated write-downs’.
IM Cannabis’ CEO, Oren Shuster, said: “Like in Israel, we have embarked on a thorough restructuring of our operations in Canada as part of our global integration efforts and to reduce costs.
“To that end, we have finalised the sale of Sublime, which, together with our streamlining initiatives in Israel, is expected to yield $6.5 million in annual cash savings. We expect the majority of savings to begin to materialise in the third quarter, with full realisation in the fourth quarter of this year.”
Cellular Goods
Cellular Goods has managed to maintain its upward trajectory this week, rising a further 35% following similar double-digit gains over the past two weeks.
Unlike the past fortnight, where gains appear to have been based on rumours of a potential takeover and wider positive sentiment across the cannabis industry, this week’s rise seems to be a reaction to the appointment of a new CFO.
On August 16, Cellular Goods announced that Bruna Nikolla would be replacing Simon Walters as CFO next month, marking the culmination of a complete overhaul of the company’s board this year.
Following the appointment of new CEO Anna Chokina in December 2021, the departure of COO Eric Chang in April 2022, and the replacement of three directors in May, CFO Mr Walters had remained as the only member of the team to have served at the company prior to December 2021.
As with the majority of the rest of the new board, Ms Nikolla joins Cellular Goods from the world of beauty and consumer health, having served as Finance Director of premium beauty and skincare brand Trinny London, and luxury eyewear brand Tom Davies.
While investors have reacted positively to the continued stream of fresh talent, the board’s inexperience within the cannabis sector has already seen it face some sales hurdles.
