A lot of green bushy stuff has turned into red splatter stuff over the past couple of days, with the US medical marijuana market having largely collapsed over the past week.
At the heart of the problems facing the sector is the increasing suspicion some of the biggest MMJ players on the OTC may face increasing scrutiny from regulators - and may have plenty to hide.
Growlife (OBB:PHOT, Stock Forum) has been trade-halted by the SEC for "concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in Growlife's common stock," leading partners to tear up supply contracts, and investors in other related companies to freak out.
Growlife is a $400m market cap company, and with weed prices already bubble-like, that pop was all that was needed to make smaller companies wobble.
Also trade-halted recently was Advanced Cannabis Solutions, for similar reasons, which lost 77% on the resumption of trading.
Not helping things was a recent shorters vs pumpers war that broke out on Twitter, which saw stock like AvWorks Aviation (OTO:SPLI, Stock Forum) plunge from a $0.45 52-week high in late March to $0.048 today, a near 90% drop. That fall comes despite the company releasing financials that show it making a solid profit.
This has given the anti-penny stock crowd penty of ammunition to crow I told ya so, but it should be noted that there's a real industry under the smoky haze of the first movers who started the craze. Growlife may crumble, and Advanced Cannabis Solutions may have been playing fast and loose, but there are some serious players in the Canadian market that are getting their game together - and they're being splashed by the bloodletting over the border.
If this is a correction, it was the correction the sector needed, to flush out the weak hands and impostors and force everyone else to pick their game up.
DOWNERS:
In Canada, the grand poobah of weed stocks, the recently listed Tweed (TSX:V.TWD, Stock Forum), opened $0.38 below the previous day's close, soon scraping perilously close to its opening day bottom of $2.35. The stock is down from $2.93 yesterday and $3.40 late last week, despite announcing a new line of vaporizers and ongoing build out of and supply to its grow operations.
Supreme Pharmaceuticals (TSX:V.SL, Stock Forum) dropped a whopping 28.5% on the day Tuesday on massive 11.1 million volume after it announced it was still involved in due diligence on a South Okanagan grow facility, and would be extending that until April 29. This would be the third extension to the DD process, and comes a day after the company said it was looking into a second plant – a move it says is routine but leaves weak hands worrying they might NEED that second facility because the first isn't going to fly. A private placement has also been cancelled, leading to a heavy sell-off.
Global Hemp Group (CSE:C.GHG, Stock Forum) announced both the acquisition of 40 tonnes of hemp seed, and an off-take agreement that should make the end product profitable, but it too was left in the red by the great weed walk-out of the past few days, down 5% at the time of writing. GHG's share price is actually now LOWER than it was when it switched names from Arris Holdings and charged headlong into the dot.bong world.
Chlormet Technologies (TSX:V.CMT, Stock Forum) is not down – but only because it is still trade halted after regulators zeroed in on it as a company that had changed direction without filing change of business paperwork. At this stage, Chlormet will be content to stay halted until the bloodletting has completed, especially if the reason for the halt happens to involve an RTO.
Satori Resources (TSX:V.BUD, Stock Forum) has been stabbed through the heart by the market of late, with it now down to $0.04 a share, from $0.105 last week. The company hasn't released any news, but is being dragged down as the sector's bellwether stock.
Enertopia (CSE:C.TOP, Stock Forum) is another company with oars in the water and a stiff wind behind them, but their share price has plummeted to 'can't be bothered selling at this price' levels, seemingly due to a ton of naked short selling.
The SEC's Regulation SHO sets the "Threshold Security List", which reports any stock where more than 0.5% of a company's total outstanding shares 'failed delivery' for five consecutive days. Enertopia is on that list, indicating shorters may be having trouble covering their positions.
Enertopia is down 25.7% today.
UPPERS:
What's up? Calyx Bio-Ventures (TSX:V.CYX, Stock Forum) is up 6.2% and Naturally Splendid (TSX:V.NSP, Stock Forum), who just appointed a former Arrowhead Water CEO to their advisory board, is up 3.9%. NOBODY ELSE.
INSIDE DIRT:
The long line of losses over the last few days would take all day to go through, but the big question remains: Is this the bubble bursting, or merely a retail shake-out?
What I'm hearing out there in the institution side is not panic, but gears turning. Yes, there'll be a few private placements cancelled as prices floor out, and there may be a couple of companies who were only in this for the spike that drift into the darkness from whence they came.
But there is a LOT of money out there waiting to be assigned, and this shakeout is perfect timing for them.
To be able to pick up a stock like SPLI at 10% of what it was selling for two weeks ago is an amazing opportunity, and one that I'm seeing a lot of Twitter folk gearing up for.
NOTE:
Yesterday's MMJ update was not posted because upon digging into the company that was to be the subject, it became a much bigger story than I anticipated. I'm still working that story and will post it tomorrow once it has gone through legal. It involves a new convert to the weed space.
THE MOVERS: