A Long Term Play On Easing Short Selling Pressure Investor confidence in International Cannabrands Inc. (CNSX:JUJU.A) is ticking high in the wake of the company announcing plans to expand distribution and consumer sales aggressively. The announcement follows the confirmation of plans to acquire a 51% stake in Riotous SOD LLC, expected to diversify the company’s business empire even further.
International Cannabrands Price Action
The stock has since bounced back after coming under immense pressure from short sellers. A bounce back from the $0.06 mark is already fuelling speculation that a bear run that had plunged the stock to all-time lows might as well have lost its edge.
An increase in turnover of shares traded could as well be the earliest signs of a stock that is ready to bottom out as part of an emerging uptrend. After finding support at the $0.09 mark, the stock looks set to continue powering high on its way to the $0.125 mark, which appears to be the next resistance level.
GEATF Daily Chart
A rally followed by a close above the $0.125 mark should open the door for International Cannabrands to make a push for the $0.175 mark, seen as the next substantial resistance level. On the downside, the stock faces immediate support at the $0.090 mark, below which it remains susceptible to further declines to 52-week lows of $0.043.
About International Cannabrands
International Cannabrands casts itself as a licensing company, following the acquisition of Julian Marley’s Juju Royal Brand. The company generates a good chunk of its revenues from licensing brands to growers as well as edible manufacturers and oil extractors in the larger cannabis sector. In addition, the company acquires micro brands with profitable operations.
Recent developments
Investors’ confidence in International Cannabrands has ticked higher in recent weeks on the company announcing plans to venture into the business of offering finance and consulting services in the cannabis sector. To do so, the company has signed a letter of intent with a view of investing $1 million in acquiring a 51% stake in Riotous SODO LLC.
Riotous will provide the company with access to some of the fastest growing and leading licensed operators in the U.S. The company deals with operators in the business of cultivation, extraction, branding as well as manufacturing in key geographies of California, Nevada and Washington State.
The investment underlines International Cannabrands new strategy of investing in accretive cannabis companies involved in branding and distribution. Riotous also boasts of diverse brand and distribution relationships, which International Cannabrands intends to make good use of going forward.
“We are extremely pleased to have been able to come to this investment with Riotous. The combination of expected strong profits and cash flow with the added bonus of an extension of our brand distribution footprint should be a significant contributor to our earnings going forward,” said CEO Steve Gurley.
Riotous should be able to start generating earnings and cash flow for International Cannabrands in the second quarter of 2019 once the investment is completed.
The investment comes months after International Cannabrands announced plans to acquire a controlling stake La Vida Verde, a company eyeing licenses for the manufacturing and distribution of cannabis in California.
Following the tabling of the $1 million investment bid, International Cannabrands board of directors has approved the ICI strategy of aggregating emerging brands as well as regional distribution companies. The team is now focused’ on capitalizing on the recent momentum having engaged the services of multiple energetic distributors with a view of reaching out to a broader target market.
The board has also reiterated its commitment to working round the clock to reduce the company’s corporate expenses as a percentage of sales. The reduction should allow the company to increase available investment to brand performance and increase turnover as a way of enhancing return on assets.
“As ICI continues to expand its businesses, having solid transparency in financial performance and strong procedures will help us manage and report to investors,” said Mr. Gurley.
What Next For International Cannabrands?
The bear run that had plunged International Cannabrands to this year’s lows appears to be losing momentum. A decline in short selling pressure is a testament that investors are slowly taking note of the company’s long-term prospects in response to recent developments.
A turn around in the direction of trade is in play as investors take note of the fact that the company is paying more attention to distribution and consumer sales in pursuit of sales that’s should lead to more shareholder value.
International Cannabrands has also shown it is willing and open to spending big if the same has the potential to accelerate long-term growth. With the upside momentum gaining pace, now appears to be the right time to buy International Cannabrands on the dip, as a long-term play.