There are but only a few companies globally which can brag about having doubled their market capitalization over a two-month period. Even fewer can speak to their market cap rising by a factor of their initial price. For this to happen, the market needs to have received a vivid explanation as to the firm’s value proposition backed by solid fundamentals and a crystal-clear vision and deal pipeline.
The above has been the case for FSD Pharma Inc (CNSX:HUGE).
The firm has continued to grow within the cannabis sector, a sector whose light continues to shine especially within the United States and Canada. Over the last one month alone, there have been numerous announcements arising from the firm regarding their different business transactions, product development as well as specific business development deals which are expected to see the firm rise through their next business phase.
As a result, their share price has correctly reflected the situation on the ground. Generally, the firm began September on a low of $.15, however, by the end of the month they were operating just shy of $.8 – a slight decline from the previous high of $.9. The price has since dropped slightly to its current position of $.575 which, despite being lower than the firm’s previous high, is still just shy of a 300% increase in the share price. Moreover, their traded volumes have consistently averaged higher than 1 million shares per day, significant of a doubling in the shares traded, a factor which signals the higher momentum associated with their share price.
Readers can review the price action described above in the following chart:
On the onset, the firm is already growing purely based on the value proposition alluded to by the rising share price. This piece, therefore, goes into looking at the drivers of this value and how these drivers are expected to impact the company going forward.
Background to HUGE
FSD Pharma Inc was founded back in 1994 when it was headquartered in Cobourg, Canada. Back then, the firm was known as Century Financial Capital Group Inc until its name change back in May 2018. Since then, the firm has operated in the cannabis sector specifically in hydroponic indoor production and processing. The firm operates through its subsidiary, FV Pharma Inc – who is licensed under Access to Cannabis for Medical Purposes Regulations – to produce marijuana.
Currently, they have a strategic alliance agreement with SciCann Therapeutics Inc which will see them produce and distribute cannabis-based products developed by the latter. The above products are, however, patent pending and are under continued development and evaluation by both teams.
There have been a number of developments which have affected FSD Pharma Inc since our last review – which is available here. Previously, there were significant short-selling pressures which were associated with the poor investor confidence. However, the tides have changed since then, mostly to their favor. Be it through their strategic investment, additional products or technological advancements, the firm has continued to pioneer development within the cannabis sector.
The Ontario Affair
The Ontario government opted to introduce legislation which would open up the market – especially through private companies – to recreational cannabis. The decision will see a player such as FSD Pharma Inc grow and scale their business massively as a result of the returns associated with cannabis in any market.
As such, with HUGE already having one of the largest production facilities in the region and having plans to grow it over time – to hire over 1,500 employees in future – there is hope that the firm will grow within Ontario. The company expects to utilize the entire 3.8 million square foot facility they operate at Cobourg – the Kraft plant facility which they previously purchased – for the production of the required cannabis strains and expect to reach full operating capacity by 2021.
The Canntab Equipment
FSD Pharma announced last month that they had received the first delivery of equipment from Canntab Therapeutics Limited. This equipment which would ensure that they have a solid hand in the pill production space would see HUGE develop up to 1.5 million tablets a day which can be blended and eventually packaged.
With this delivery came an agreement which would see FSD Pharma support Canntab in their quest to be licensed by AMPCR as well as provide them with space – 10,000 square feet – in which they can build and operate their own cannabis manufacturing facility. As a result, Canntab will pay HUGE 3.5% royalties and 50% of the profits made from sales made through this channel.
Auxly Inc has subscribed to 7.5 million class B Subordinate voting shares of FSD Pharma at $1 per share. This presents a strategic investment by Auxly will see the two firms’ partner on a number of projects going forward.
This $7.5 million investment will see both firms develop the 220,000 square feet cultivation space as well as FSD develop its 62,000 square foot facility. All in all, the partnership will mutually benefit them and lead to their growth going forward.
There is a lot which has happened to HUGE over the past two months. Thus far, the firm has grown drastically and is expected to maintain this trajectory. Growth is thus imminent for them.
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Disclosure: We have no position in HUGE and have not been compensated for this article.
** From FSD Pharma IR department:
- 25,000 sqft is cultivating right now
- The entire indoor space consists of 630,000 sqft.
- The FSD Pharma future developments/expansions will have up 3,896,000 square feet.