Emblem Corp EMMBF

RE:RE:RE:HVST Bought Deal

[deminimis]

Spasticated, the HVST press release stated the funds would be used for working capital. It is very missleading for these companies (including Emblem) to claim that they are fully funded for X project while at the same time burning tons of cash on Opex (Even Aphria burned almost $4M last quarter). Sure, maybe you technically have just enough cash on had to cover the Capex for the expansion but you don't have enough to cover the Opex burn so you are going to have to raise more funds just the same.

Regarding the understatement of costs, I have been thinking more about this I think it is just too far-fetched. I just can't believe that the entire sector would all be in on the same scam, I'd totally believe that a couple of players are doing but not every single one. It would be too easy to get caught on this and risk getting slapped by the regulators. I also combed through the investment in capital assets line on muliptle LPs cash statements for multiple periods and could not see anything that looked out of whack.

I think the reason all of these LPs have been raising so much cash is because of the reason stated in the first paragraph and because they are taking advantage of their wildly inflated market caps lest they take a big tumble.

I have a new theory, although one could argue it is even more far-fetched than the understatement of expenses across the entire sector: I think Emblem is intentionally trying to sandbag right now. 

Why would they do this? Well, they have become the pariah of the sector because they were massively overhyped before their listing and then stumbled out of the gate and failed to come close to delivering on any of that hype. 

I think they want to build the narrative that Nick Dean is the saviour of the company and thus are holding onto good news until he is on board so that he can take the credit for it in order to build excitement and get investors interested in this stock again. There are two things that happened recently that have led me to beileve these guys are either completely incompetent(which I still do not believe) or that they are sandbagging:

1 - They have been saying for almost a year that they are expecting that oils sales license any day and that the delay has been killing them. Yet, they received that license more than two weeks ago and they haven't even annouced what oils they will offer for sale and have said that once the annoucement has been made, sales won't even commence immediaitely. This makes absolutely no sense, all of the oils have been sitting in their vault ready to go for months just waiting for that license. The fact that they weren't on the store within days is unconscionable unless they were deliberately trying to sandbag Q4 a bit in order to have an absolute blockbuster Q1, Nick's first quarter on the job. It's not crazy to say that they could top $5M in Q1 if they can blow out 150KGs of the oil they have in inventory in Q1.

2 - As mentioned last week, $55M for a 120K greenhouse just makes no sense whatsoever. Emblem's expansion plans have been seen by most to be very underwhelming and unambitious by most. I wonder if once Nick gets on board we see in all over BNN projecting a much more exciting and agressive leader for Emblem and annouces that they have upped their expansion plans to something like 250-300K sq ft but we find out that magically the Capex hasn't changed much. 

I think this would really get the stock flying going into legalization. Could see many articles saying that Canopy is way overbought and that their 10% QoQ revenue gains aren't moving the needle and that investors would be much better off getting in on this company that is boasting massive revenue growth and whose stock is up 200%+ ytd but still has massive potential due to their upcoming pharma products. This would probably lead to a lot of warrant holders exercising their warrants plus allow them to do a massive $50-75M bought deal which would leave them with a huge war chest.....or maybe I am just trying to convince myself that I haven't invested in a total dog.