RE:Time the market, follow trend and trade this sector only.
PUNJABI wrote: This is how long-term shareholders are being destroyed. Dilution to pay for the current losses of the company, more dilution to overpay to buy revenues and money-losing companies and then further dilution to pay for the increasing losses of all the accumulated companies. This show will continue till the company has the ability to raise more money.
This is being done by the entire sector. There is nothing exceptional about this management they are in a rat race with other companies. There is little to no organic growth so they buy revenues at a very expensive price. This model was also used by the DOT COM companies and even Nortel. Same approach. Management does not care about the shareholders. They will dilute and then dilute again till the share count get too big and they will do a reverse split and start all over again. Look at HEXO.
Let take for example VLNS is going to buy Citizen stash. Don’t know much about the deal just took the amount from the news release that they are going to pay $54m for the company. So what are they going to get in return for $54m ? Just look at the balance sheet of Citizen stash.
Just main items not taking a/c rec & payables and some other items.
Cash 1.6m
Inventory 3.2 (there might be some dead inventory too )
Land and Equipment 5.6m
Total : 10.4m minus Debt of $2.2 = $8.2m
Revenue $2.7m/ QTR
Loss $1.2 m/ QTR
For every dollar, they generate they lose $.44. These losses could drain the company for years. Their margins have to improve very significantly just to break even. That is not going to happen in the current environment.
Tangible assets are under $10m yet the company is paying $54m.
So what the company is doing is they are buying money-losing company and buying unprofitable revenues for a big price. Eventually, a huge amount will be written off.
All the companies in this sector are collecting liabilities. The entire sector is a trap for long-term investors. The only way one can make money is to know the risks. Time the market and trade it.
The tax-loss season is coming there might be a trade in the sector.
Punjabi, while I believe your views are overly bearish and rather uninformed (you do not listen to mgt calls to account for nuance or strategy) the financials are admittedly not telling a a great story right now. Without a doubt the financier sharks are starting to circle after today's release and a raise will be needed by Q1 I think. Too many pivots and not a whole lot to show for it yet except ballooning opex and an uninspiring margin profile. They have built a top tier platform and are plugging in the pieces very opportunistically (B2C owned brands and larger B2B LP customers) but that's not yet showing up in the numbers. If you'd listened to the Green Roads and Citizen Stash calls you might begin to realize the incredible talented management teams joining Valens but you're like a bean counter with his blinders on, missing the forest for the trees always looking for any opportunity to pounce and say "I told you so!" Perhaps your trade it strategy is the better approach but I'll give these guys 2 or 3 more quarters to prove out their mettle. If they're still pivoting and burning cash at that point then I'll admit defeat and say "Punjabi you were right".