RE:Auxly Double Over The Next Year I still give credit to them for creating good products and building out a large platform, but the analyst himself sees big downside and is only keeping this outperform and 0.40$ due to Imperial. If you believe SG&A is coming down and they will limit dilution then this might be a good play. I wouldn't bet on it though. Much easier ways to make money in this market.
Sarugaser had some words about two issues, namely, what he called the company’s bloated SG&A and the new convertible debt financing. On the former, the analyst said he’d like to see Auxly’s costs come more in line with its cannabis peers, while on the latter he said the terms of the financing are, in fact, “quite onerous.”
“While our estimate of the total potential dilution from this convertible debt facility is 136.9 million shares—an inordinate amount of dilution in our view—management has reflected that between growth of top-line revenue, increasing gross margins, and controlling costs, they should be able to mitigate further draws on the facility. We give them the benefit of the doubt, adding only the potential dilution from the currently drawn $9.5 million, and remain cautiously optimistic that management should succeed in sourcing less dilutive forms of financing to meet XLY's working capital needs,” Sarugaser wrote.