The share price of General Cannabis Corp (OTCMKTS:CANN) has experienced significant volatility over the recent past as shown in the chart below:
After experiencing one of the longest bear runs over last year, the stock finally took an upward trajectory in December, rising from below $2 to highs of up to $11. However, as has been seen across the cannabis market, the price over January has plummeted leading the company to close yesterday at a $4.
However, this has impacted the industry at large rather than the specific company. We, therefore, decided to take a look at the company and evaluate whether their decline is fundamental driven or simply driven by their sensitivity to the market.
CANN: An Overview
Before then, however, let us have an overview of the company for the sake of first-time readers.
General Cannabis Corporation was incorporated on 12th of November 1987. Its core mandate is to offer various products and services to companies in the cannabis industry. It offers solutions such as operational and compliance consulting to security and marketing as well as financing needs. Its structure comprises of various segment’s which include Security and Cash Management Services, marketing and Products, Consulting and Advisory and Finance and Real Estate.
The company is based in Denver and prides itself as a leader in the cannabis industry. It offers a variety of products and services to companies in this sector ranging from operational and compliance to security, marketing, and financing needs. It owns subsidiaries such as Chief Ton Supply, Next Big Corp, Iron protection and they all have a substantial shareholding in the multi-billion medical marijuana business.
The Acquisition Spree
The company has been on an acquisition spree since late last year. This has been a highlight for them as they work towards implementation of a vertical and horizontal integration strategy.
The company acquired Miles High Corporation. The subsidiary offers security services to the hospitality industry. The acquisition will complement the current security business offered by its other subsidiary; Iron protection Group. This acquisition will see the company gain a foothold in the Colorado cannabis security market.
The acquisition of GC Finane Arizona in June has had the positive effect of expanding the business into hitherto unexplored territories in the business of producing and distributing medical Marianas based products. GC Finane distributes a full line of medical marijuana products including Dixie Elixirs and edible products in the state of Arizona. This subsidiary joined the parent company General Cannabis by contributing 16000 square feet of idle space. The partnership will see high quality medical Marianas products introduced in the market.
The projections on revenue growth in the cannabis products space are expected to grow with an international global forecast of $31.4 billion by 2021. Revenue diversification and product diversification will be the key drivers that will steer the company’s future growth.
On fourth of January this year General Cannabis Corp adopted a measure of strengthening its balance sheet through debt reduction. The company paid off the full balance of its 12% Notes of $621,250 which were due in September 2018.The move would improve the company’s liquidity position and improve shareholder returns going forward. The company used funds from equity offering and sale of real estate assets to ensure a clean, healthy balance sheet. The company also wishes to adopt an aggressive campaign to penetrate newly regulated cannabis markets.
The Green Leaf Effect
One of the clients of General Cannabis Corp. Green Leaf Medical LLC which is a leading grower and supplier of medical cannabis in Maryland, announced a successful harvest of its first crop on 2nd of February this year. The said harvest has passed all state-required laboratory tests. The firm will now be producing between 500-600 pounds of high-quality medical marijuana on a monthly basis. Green Leaf is one of the leading fully approved suppliers in Maryland. This is a big boost to General Cannabis
Green leaf has also begun the next phase of its expansion to increase the size of its facility to about 50,000 square feet which translates to a 67 percent increase from its current capacity. The expansion could see Green Leaf increase production totals to nearly 1000 pounds per month. The success of Green Leaf can be attributed to its partnership with Next Big Crop which helped to design a modern facility for growing the crop. This has, in turn, led to improved crop quality and customer satisfaction especially Maryland patients. Philip Goldberg, the Green Leaf C.E.O. was quite upbeat about the production of a high-quality product that meets pharmaceutical manufacturing standards. He was positive that the fruits of his firm’s partnership with Next Big Crop are there for all to see which have been achieved in only four months.
The company posted good financial results for the third quarter ending on 30th September 2017 which saw total revenues increase to a high of $980,000 which was a 21% increase compared to the previous year. Operations revenue rose by a huge margin of 210%, and the subsidiary Next Big Corp also posted a remarkable improvement recording revenue increase of 227%. This has led to an increased appetite for the company’s shares the company expects increased revenue streams driven by increased demand for services in Next Big Corp.
With the above news all being positive, we can only expect that their share price trend will follow the same trajectory. As such, we remain bullish about the company’s future share price.
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Disclosure: We have no position in CANN and have not been compensated for this article.