Medical Marijuana Inc (MJNA)

[Det_Robert_Thorne]

What's the real value of Cannavest stock?

The reason I call the Cannavest deal smoke and mirrors is because it is nearly impossible to come up with a real valuation for Cannavest stock.

Yeah, they priced the deal at $35M, but what is the foundation for that? Cannavest couldn't pay in cash, as they have none, except perhaps for a $2M loan or line of credit from the CEO, Michael Mona to the company.

Until they make a required payment to $MJNA in cash, then the only value of the deal is Cannavest stock, which is nearly completely illiquid.

Sure, right now, Cannavest's stock price is at $13.50, which is significantly higher than the $4.50 - $6 collar, but only 100 shares of Cannavest stock have traded in the last eight trading days.

Today, that $13.50 price is based on hope and excitement, but Cannavest's next 10-Q, due next week, will show how much cash on hand they have and their Q1 revenue. Supposedly there was over $1M in CBD sales, but were they paid with cash, what was their COGS, and how much was profit?

If Cannavest wanted to raise cash by selling shares, the price would likely move considerably lower.

Suppose Cannavest shares go to $3. If Cannavest then makes the next payment of $8M due at the end of Q1 in shares, as expected, then they will give MJNA about 1.8M shares at $4.50 (the lower collar), which on the day MJNA receives them, will actually be worth $5.3M, not $8M. MJNA would be immediately taking a "mark to market" loss on the shares.

That's one reason why I'm skeptical of the deal.