Vibe Growth Corp C.VIBE

VIBE Reality Check - Just the Facts

[davgro]

I personally see no upside to Vibe's current share price based on the current market sentiment in the cannabis sector and the financial information gleaned from Vibe's Q4 results. In fact, I would not be surprised to see a continued slow decrease in Vibe's share price heading into the summer months.   It is not surprising that Doug Cooper of Beacon Securities, the only analyst following VIBE has not given an opinion on the stock since September 2021 when he maintained his CAD $2.60 target for the stock and a Buy rating.  That report to his clients now reads like a bad fairy tale.

• In just over a year Vibe's share float has gone from 76,404,977 to 112,143,071, an increase of almost 47%.  This translates to major shareholder dilution.

• On April 6th, 2021 when the stock peaked at CAD $1.45 the company had a market cap of almost CAD $149M, just over a year later the market cap is just about CAD $27M.  That's an 82% decrease in the market cap of the company.

• For the year-ending December 31st, 2021, Vibe lost USD $4.3M

• The high tax rate in California and its large black market will continue to strain the profitability and viability of the company.

• With the high probability of major GOP wins in the mid-term elections it is unlikely you will see movement on the passage of the SAFE Banking Act, changes to IRS Tax Code 280E, or decriminalization/legalization of cannabis at the US Federal level.  This will put continued downward pressure on cannabis stocks and US MSOs. 

• Unless Vibe can generate positive free cash flow it will continue to bleed cash which will subsequently hinder growth and any future acquisitions. 

• Vibe's last "major" bought deal financing closed on March 16th, 2021 for proceeds of CAD $13.8M at CAD $0.82 per share.  That financing piggy-backed on the early 2021 rise in cannabis stock prices tied to speculation that there would soon be reform in US marijuana laws.  That never materialized and stock prices have crumbled.  Any future Vibe financing will be done at a fraction of the current share price because investors have now soured on cannabis stocks.

• With low cannabis prices being the new market norm, the industry is poised for a potentially tumultuous time of business failures and acquisitions.  What premium is realistic for a Vibe takeover.  A premium of 2x the current share price would still result in heavy losses for all past VCAN shareholders.

• Stifel analyst W. Andrew Carter on Monday said the firm continues to approach the cannabis sector with “negative overall bias” amid a reduced outlook for the U.S. market.  Carter trimmed his view for the total 2022 U.S. cannabis sales to $27.2 billion from an earlier estimate of $28.6 billion amid decelerating category growth, oversupply, outsized pressure on lower income consumer spending, rising input cost
  inflation and increased capital costs.