Aleafia Health Inc ALEAF

Silly Price

[DCFrules]

The closing price of Aleafia dropped to a silly level of $0.155 on Friday. Based on the Sep 30 financial statements, the value of working capital (excluding debt and leases) is $49 mil. Add to this the $83 mil total value of PP&E, right-of-use assets and investments yields $132 million. Subtract from this the $47 mil of debt and lease obligations yields $85 mil. In other words, if the company were dismantled today and its assets sold at these book values and debt repaid, there would be net proceeds of $85 mil (less severance packages, legal fees, windup costs etc.). It may be that today’s market values of assets are below reported book values meaning that net proceeds will be lower than $85 mil. However, the $85 mil ignores new value from Aleafia’s Fall harvest, so maybe $85 is a realistic liquidation estimate.
On Sep 30, Aleafia had 331 mil shares outstanding. Multiplying this by $0.155 yields $51 mil. This capitalization value is significantly below a liquidation value of $85 mil. A price of $0.155 appears to be valuing the stock below the company’s liquidation value which doesn’t make any sense. Congratulations to those who purchased shares at this silly price!

[KeyserShoze]

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[DCFrules]

Valid point, but moving from 331 mil shares to 500 mil shares suggests 169 mil new shares will be sold. Multiplying this by $0.155 yields $26 mil. Based on past performance, I don't believe Aleafia will need more than $15 mil, particularly if the Fall harvest is profitable. This may also be supported by the observation that Aleafia hasn't announced any new financing as yet. You could very