FSD Pharma Inc (CNSX:HUGE) sentiments in the market have turned sour even on surpassing the one billion mark on shares traded. The stock is the subject of increased short selling pressure as sellers threaten to push it to new lows.
Over the past few weeks, the stock has shed more than 20% in market value as a bear run that begun in June continues to gain momentum. The stock is now at risk of edging lower after breaking a key support level at the $0.15 mark.
Investors appear to be shunning the stock on a luck of important news that can be used to affirm the company’s long-term prospects. The stock looks set to remain under pressure until the company achieved a key milestone in its push to become a key player in the cannabis business.
About FSD Pharma
FSD Pharma owns a license for the production of marijuana through its wholly owned subsidiary FV Pharma. The company is in the process of transforming a former Kraft plant in Cobourg into one of the largest hydroponic indoor cannabis facility in the world. With the facility, the company hopes to become a leader in the cultivation, processing, manufacturing, and extraction of cannabis.
A major piece of information about the company’s operations came to light in July after the firm announced the signing of a binding agreement for the purchase of Atlantic Island cannabis Inc. The company is to issue Class B Subordinate shares valued at $6.5 million for the 51% stake in Atlantic Island. The transaction is set to close on or before August 31, 2018
The company also announced a $40 million investment in Atlantic Island Cannabis. The Funds are to be used to drive production as well as the sale of legal cannabis in the province of Newfoundland. Phase 2 of the project will see the expansion of the indoor grow facility to about 300,000 square feet.
“Newfoundland is a fantastic province with outstanding, highly skilled people,” said Thomas Fairfull, President, and CEO, FSD Pharma Inc. “This is another expansion milestone for FSD Pharma as we continue to grow our production and distribution footprint nationally.”
Saskatchewan Supply MOU
FSD Pharma through its subsidiary FV Pharma has also entered into a memorandum of understanding with Hide Tide Ventures Inc. for the supply of 5,000 kilograms worth of cannabis products. Hide Tide is currently pursuing a license that will allow it to operate as a wholesaler of cannabis products in Saskatchewan.
A deal with Hide Tide Ventures provides yet another unique sales channel that the company hopes to take advantage of in pursuit of revenues, to shore up the bottom line. According to FSD CEO, Thomas Fairfull, the non-binding MOU underscores FSD Pharma commitment to growing high quality indoor hydroponic cannabis.
Hide Tide is plotting to become a strong downstream player in Canada’s upcoming recreational cannabis industry. To fulfill its ambitions, the company will need a reliable stream of cannabis products to quench the thirst of recreational users, ones the market comes online in October. FSD Pharma being a strategic partners stands to benefit a great deal given the strong demand expected to come into play.
“High Tide has achieved an important strategic milestone by securing its first wholesale business partner for Saskatchewan and its 51 retail cannabis outlets. We want to ensure that High Tide is able to offer consumers a variety of options that they actually enjoy,” said Mr. Fairfull.
Merger and Acquisition Push
FSD Pharma has also underscored its commitment to pursuing growth opportunities through mergers and acquisitions. The company has since confirmed the formation of a special committee of the board of directors, tasked with the responsibility of pursuing mergers and acquisitions opportunities.
The committee is to explore in partnership with other legal and financial advisor potential mergers and acquisitions that have the potential to spur new opportunities for growth. In addition, the company has confirmed the appointment of Mr. Donald Carroll as the interim Chief Financial Officer. Mr. Carroll will be part of the special Committee along with other three directors.
The stock has served a number of catalysts that in most cases would have reinvigorated investor sentiments in the stock. However, that has not been the case as the stock has continued to trade lower. Investor confidence in FD Pharma appears to have taken a big hit if the pace at which the stock is dropping is anything to go by.
For a turnaround in the stock’s direction of trade to come into play, FSD Pharma will have to serve a significant catalyst in the form of its achievement or long-term plans. Until then, the stock looks set to continue trading lower.
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Disclosure: We have no position in HUGE and have not been compensated for this article.