Lexaria Bioscience Corp (OTCMKTS:LXRP) was analyzed by my colleague ‘Alex Carlson’ in this piece a few months ago. We recently received several mails from regular readers asking for an update. The stock has been quite bullish lately, so we are glad to write about it again. In addition, several things have happened very recently. So, we believe that we needed to note them in a new piece. First of all, have a look at how the price moved in April.
On April 18, 2017, the company released news welcoming the proposed Cannabis Legislation. We agree that the new legislation will be very positive for the business of Lexaria and will help increase its top line. However, we did not find new valuable information in that press release. Additionally, the share price did not react to it.
Another very relevant communication occurred on April 10, 2017 that really got the market excited. It is the only way that we can explain the volume that you could see in the chart. On that day, Lexaria and NeutriSci International Inc. (CVE: NU) (NRXCF) finalized a joint venture to commercialize cannabinoid sublingual tablets using the technology of both NeutriSci and Lexaria.
The new company that will commercialize the products is Ambarii Trade Corporation. Each party will have a 50% share in the company. The product will be sold in California, Colorado and Canada. Both companies have confirmed that it will contain THC and CBD. The joint venture already has an entity in California to start the manufacturing process as soon as possible. Finally, in the press release, we could read that Ambarii will also enter the hemp oil based market for sublingual melt products. We selected the following from the words of Glen Rehman, President of NeutriSci:
“We are thrilled to officially partner with Lexaria. As we continue our advanced discussions with some of Canada’s leading medical marijuana companies, this JV Agreement represents a giant leap forward for the development, sale and manufacturing of cannabis edibles. ” Source
The launch of a new product always means that the company will attempt to increase the top line. Thus, the market usually responds positively to these kind of communications.
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In addition, on March 24, 2017, Lexaria announced that it had received $32,503.90 from the exercise of several convertible securities, warrants and stock options. 143,000 common shares were issued as a result of this transaction. The total amount of outstanding shares is 56,901,479.
In general, such news are not welcomed by shareholders, since they see that the company dilutes the previous stockholders. However, investors need to understand that this is a start up company and needs equity financing to operate and convertible securities are very sexy instruments for new investors. Investors need to be more interested in how the company markets and develops its products, and how the new products are launched, since it is more important than having 5.5% of the total outstanding shares instead of 5.56%. In addition, they should welcome and celebrate new investments coming as debt or equity since it means that the company is succeeding and more investors are putting their faith in the company.
Lexaria recently announced a joint venture with the Canadian company ‘NeutriSci’ to develop a new product; cannabinoid sublingual tablets. The market responded very well to this information and traders using news alerts may have profited from this information. We expect that the new products will bring new revenues and the company will be able to show top line growth soon. In addition, we saw how the convertible securities issued by the company are being exercised and new shares being issued as a result. We believe that investors should not be afraid of the small dilution that these securities may create and should focus more on supervising the company’s operations. Judging by the looks of things, there’s a lot to like about LXRP.
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Disclosure: We have no position in LXRP and have not been compensated for this article.