There has been a lot happening in the cannabis market, however, this compares less to the current ongoings in the trading of Curaleaf Inc (CNSX:CURA).
The firm has been involved in a number of reverse takeovers which have culminated in them listing the stock in the Canadian Securities Exchange (CSE). This entire period, moreover, they have engaged in numerous activities meant to see them scale their business and venture out of the United States confines where they are mainly based and grow internationally with Canada as a primary starting point, the result of which has been a rising share price.
With the firm having begun trading on the CSE two days ago, the price volatility has been drastic. The listing saw the price drop significantly over the first day of trading – the reason for the above is explained later – but bounce back only a day later. Currently, the firm is trading at CAD $9.5. However, back on the OTC markets, the firm maintained its name while trading under the ticker symbol “LDVTF”. On this market, it currently trades at US $7.21, the equivalent of CAD $9.5, thus ensuring parity.
As previously stated, there has been a lot of volatility in the trades. However, the price has, between Tuesday and Wednesday surged greatly from lows of below $6 per share to highs just shy of $7.5 per share. Eventually, it settled at the current price of $7.21 per share.
Readers can review the above price action in the chart below:
The reason for most of what has been happening is looked into over the course of this piece. We further take a look at the business transactions which have been happening as well as the expected business transactions while concluding on the host of reverse takeovers which have seen then get to their current position.
A Brief Look at CURA
Curaleaf is a Massachusetts-based company which operates primarily within the United States. The firm’s operations span across 12 states and comprise of dispensaries, processing sites as well as cultivation facilities. Through this, they have brought together a team of physicians, visionaries and other medical experts to aid in the development and promotion of the company’s brand. Currently, they are renown for their premium cannabis brand which is available in multiple states through the firm’s established networks.
Our previous assertion that a number of transactions have happened in the recent past, all which have played a role in the firm’s current listing position. This section reviews the latter and explains their ramifications on the firm’s future prospects.
Reverse Takeover and Capital Raises
There has been a series of multi-state cannabis operators going public in both the United States and Canada. Curaleaf is the latest among them. However, the firm did this through a reverse takeover. Earlier this week, Curaleaf engaged in the reverse takeover of Lead Ventures Inc, a Vancouver-based cannabis operator. Through this, the firm was able to secure their position within the Canadian market – one of the largest cannabis markets currently – thus ensure that their internationalization strategy is fully executed.
The firm which currently services over 33,000 unique patients and has employed over 875 people is expected to have a valuation of about $4 billion. As such, their most recent private placement has also seen them sell a part of this business to other investors prior to them going public. Through this, they were able to raise US $400 million, marking the largest equity financing for a cannabis company to date.
As a result of the above two, the company listed their shares on the Canadian Securities Exchange. The listing coupled with the amount raised via the private placement have not only secured the firm’s position in history but also ensure that they can raise further capital going forward. This solidifies their position as a cannabis player and also boosts their financial muscle especially now that they have opted to venture into Canada.
The Share Price Dip
While the firm’s fortunes seemed all too bright, the firm’s share price took a nosedive on the first day of trading.
Analysts, however, explained that this is a common phenomenon in the listing process. According to Evan Eneman, CEO of cannabis advisory company ELLO, the windfall and subsequent surge in prices is a common occurrence in the market. He states:
“This selloff and cooling of the cannabis stocks in Canada and their U.S. listings are nothing new. This has been the same cycle for the past two years, as major milestones have been achieved in the industry, meaning the runup of anticipation and then the selloff to take gains by early investors.”
With this in mind, a correction was this expected from CURA, one which actually already came to be. A day after the windfall, the price reversed and rose to its current level. As such, investors in the stock can now remain calm and await the positive returns promised by the firm – while monitoring the firm’s operations.
Despite the decline in the prices of CURA, the firm’s share price has continued to show resilience. Its quick recovery following the massive sell-off – explained above – only goes to show this resilience further. As such investors in the firm can continue expecting positive performance going forward as the firm continues to benefit from positive cash flows, a strong financial backing as well as higher expected revenues associated with their growth into the Canadian market. Upon this backdrop, we remain bullish about the firm’s outlook.
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Disclosure: We have no position in CURA and have not been compensated for this article.