After a previous downturn and two months’ consolidation on the $.02 candle, Hemp Inc (OTCMKTS:HEMP) is showing momentum again. Taking into consideration the previous share price spikes in August and December 2018, the bullish thesis is drawing the attention of the market. In addition, the recent increase in the trading volume also shows that market interest is growing around this name. It can all be seen in the following stock chart:
What Does Hemp Inc Do?
Founded in 2008 and headquartered in Las Vegas, Nevada, HEMP’s long-term goal is to be the leader in the industrial hemp industry in America. The company provides products that are eco-friendly, organic, healthy and solutions that replace many petroleum-based products. Counting with the largest decortication plant in North America, the company is focused on the production of fiber, loss circulation materials (LCM) and absorbents from kenaf and later from hemp.
Watch the following video, which shows the current facilities and the business plan:
Targeting a multimillion dollar market, we believe that the company has adequate capacity to make a large number of revenues in the following years as the industry grows. In our opinion, there are two features to appreciate here. Firstly, the company started very early in this business, so it should have accumulated know-how and contacts, which will be beneficial against new competitors.
Additionally, the founder Bruce Perlowin, also called ‘King of Pot,’ is an experienced individual, who learned the business when the marijuana was not legal in America. While some market participants will dislike his profile (he had a problem with justice), yet he brings ten times more expertise accumulated than any new venture capitalists. In our opinion, he is not here to lick money; he is here because of his deep understanding of marijuana.
What’s new in 2018?
Things seem to go much better for the company in the new year. While the SEC charged the company and the CEO for selling unregistered shares to investors, yet Mr. Perlowin has been defending its business very well. The company has continued sending press releases about its operations and has published its financials through the company website.
We will tell you the most remarkable in this new piece.
HEMP commenced the year 2018 suffering a market decline. The reason was Attorney General Jeff Sessions’ decision to rescind the Cole memo, which limited the type of cannabis prosecutions in States in which marijuana is legal. While every marijuana stock lost a big part of its market cap, in our opinion, HEMP reacted very well and lost only 25% following the announcement.
What did HEMP do?
Following the decision of the Attorney General, Mr. Perlowin rapidly explained that the new measure was not going to damage the business of the company:
“Hemp, Inc. is totally unaffected by this ‘I declare war’ game. Hemp, Inc. is not even harvesting large scale hemp grows yet. Our current focus is still on kenaf. We have 18,000,000 pounds of it in inventory and another 2,000,000 to be harvested in the next couple of months. At $2 to $4 per pound, we are looking at some very hefty revenues!” Source
There is more. The company also noted the numbers released by the 2017 report from Marijuana Business Daily. It is expecting the legal cannabis market in the U.S. to grow by 45% in 2018 and by an aggregate of 300% between 2016 and 2021 to approximately $17 billion. With these numbers in mind, we should be expecting HEMP stock to creep up as the new quarterly reports hit the tape.
In addition, something very important was released as well in January. The company fulfilled its first purchase order for Spill-Be-Gone™, part of Hemp, Inc.’s spill-absorbent family of products, for a company in Georgia. While we share the optimism shown by HEMP on this announcement, we need to note the following. These announcements show the shareholders that the company continues its business after the SEC attacked the management. Many shareholders may be selling shares after the problem with the SEC for no reason, thus we believe that it is a relevant remark.
March was critical for HEMP
In March, the share price and the volume spiked several times as a result of several beneficial news released by HEMP. On March 7, 2018, the company released that it is set to grow up to 25,000 acres of industrial hemp this year, thus making North Carolina the “Epicenter of the Industrial Hemp Industry.” While the announcement is not a game changer and did not create a large market reaction, we believe that as revenues commence to show up, the market participants will take this new information more seriously.
Additionally, on March 13, 2018, the company signed a consulting agreement with HQ Global Education, Inc., a scientific research development company, to provide consulting services in an effort to help HQ Global Education, Inc. expand into the hemp-CBD industry. We will need to follow closely the relationship with this new firm since the plan seems to be to sign a joint venture, whereby Hemp, Inc. will house and operate HQ Global Education, Inc.; CBD extractor. With these announcements, the company proves two things. Firstly, it is able to grow through agreements with third parties. In addition, the company is well respected, as other companies in the industry are interested in collaboration agreements.
Finally, the most recent stock reaction was created by an announcement made on March 21, 2018. HQ Global Education, Inc. was said to be in final negotiations to purchase a customized, state-of-the-art CBD extraction machine to be housed in Hemp, Inc.’s multi-purpose industrial hemp processing facility in North Carolina. The market reaction makes sense, as the news shows that capacity will be increased. Additionally, we could also read that there would be some synergies as a result of the agreement:
“The business synergies that will be realized between Hemp, Inc. and HQ Global Education, Inc. through this consultant agreement are paramount to our ongoing efforts to identify and align with strategic partners that will allow us to meet the rapidly growing demand for hemp-derived CBD oil and other products. “ said Hemp, Inc. CEO Bruce Perlowin.
With little information about how the new agreements will affect the revenue line, yet this news shows that the company is growing at a high pace. While we are talking about an emerging industry and growth is expected, yet more details would be appreciated. We will stay tuned.
Currently trading with a market cap of $18 million, HEMP is an exciting story among small caps. With the fantastic developments in mind, our biggest concern is the relationship of HEMP with the OTC Markets. After the litigation from the SEC, the exchange decided to discontinue its services, which, in our opinion, damages the image of the company. We hope that the problems will be sorted out soon.
Disclosure: We have no position in HEMP and have not been compensated for this article.
Image courtesy of Mike Mozart via Flickr.