We need to highlight today one of most unusual share price spikes seen in the new year 2018. Market participants could see it in the stock chart of INTEGRATED CANNABI (OTCMKTS:IGPK), a company operating in the marijuana industry.
From below the share price resistance of $0.01, the market participants could see the share price spike astonishingly touching the one-year highs of $0.038. For those who need a calculator, this share price movement represents more than 200% stock returns in a short period. It is quite surprising even for an OTC stock.
But, there is more.
The amount of volume shown by the exchange was also remarkable. More than 10 million shares were exchanged while the share price was still maintaining an upward trend. It is very significant. The large volume is usually associated with significant market interest.
Have a look at the share price action before we tell our opinion:
IGPK was founded in 1995 and is currently headquartered in Reno, Nevada. We could read in the company materials that IGPK is focused on offering its suite of services geared towards reducing the risk, cost, and complexity for responsible cannabis businesses during this great process of transitioning from prohibition to regulation.
Additionally, the company’s subsidiary “Skywalker Accelerator, LLC” is in charge of helping other businesses enter the cannabis sector. This other company, which was acquired on September 29, 2014, was said to be “the first accelerator dedicated to cannabis startups.” We need to admit that both companies started early in this business. Most States in the U.S. and Canada had not regulated the use of marijuana in their territories. This is rather good; we appreciated since Skywalker and IGPK should have accumulated a significant amount of know-how in the industry. It will help the companies compete with new businesses that recently decided to deal with marijuana after its legalization.
What type of services are offered by Skywalker?
The company provides mentorship and regulatory guidance in this industry along with wide-ranging expertise from manufacturing to biotech, product design to distribution, and from marijuana to hemp. These services seemed to be much demand in 2014 when the company’s acquisition was released. More than 100 applications from cannabis entrepreneurs had been received in the first application window. We believe that the number of applications received now should be more than that, as the demand for marijuana has increased in the last three years.
The financial statements
We believe that IGPK is well positioned to profit from the recent dramatic increase in the demand for marijuana. Additionally, we think that there should be, right now, many companies contacting Skywalker to obtain licenses to sell marijuana. In our opinion, these are the two primary drivers of the share price spike.
However, there is a significant factor that we don’t appreciate. The company has not released its reports for the last two years. It is not sufficient that the company seems to be one of the oldest operators in the cannabis space. If the new financial statements are not released, then dealing with the shares of this company seems quite speculative.
In our opinion, the financial situation of the company should have changed much since its last report in 2015. But, since we want to offer a complete version of the company, here is a photo of the balance sheet as of September 30, 2015. Please note that many emerging companies usually show a similar financial profile:
The following is also the income statement shown as of September 30, 2015. Please note that the weighted average number of common shares is also shown. Let us add that the numbers of shares outstanding did not change in this time period:
The share price spike – What’s the social media tell?
When there is a share price movement that we don’t understand, we usually check what other market participants are telling. In this case, we went to check the opinion of members of the iHub forum. Among many comments, we found what we were looking for:
From January 1, 2018, licensed cannabis vendors can sell marijuana to clients. The Government had approved it a few months ago, but the new law became official in 2018.
What’s our take?
We agree with what the iHub forum said. We would add that many new cannabis shops may want to get a license now in the state of California. Additionally, it makes sense that market participants believed that the company’s subsidiary, Skywalker, could be qualified for helping these shops. They may have acquired shares of the company moving up the share price.
The company is a low float runner – Conclusion
The float is equal to 133,997,462 shares. It is low as compared to the total outstanding shares. This means that significant market orders could move the share price. It helps explain the recent share price volatility seen on the exchange.
Currently trading with a market cap of $12 million, IGPK is an interesting story among small caps. In our opinion, some market participants seem to be obtaining returns on this name, but we believe that the risk is high.
Until the new financial statements are released, even if the stock returns are impressive, we believe that staying away from the company is the right thing to do. Volatility lovers may be interested in an adrenaline ride here; all the others should not. There are better names in the sector to play.
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Disclosure: We have no position in IGPK and have not been compensated for this article.
Image courtesy of Cxelf via Flickr