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Closing SP $3.04 suggests the market isn’t too concerned as well.
I see there is a “President, California Operations” on the management team so I can rationalize that Pedersen as President is redundant. However, with millions of shares, I’m surprised he was dropped from the board.
I think there was a director/executive management disagreement on a major decision - divestiture, stock dilution/financing, sale of assets, acquisition of Sunniva...
Is there a bottom here?
Thanks for posting this interview. Good info. I can't imagine Sunniva replicating this facility over and over in pursuit of long term growth.
Acquisition target? I could see Aurora as a buyer when they decide to enter the US market.
That’s what I did this week. Picked up more shares and averaged down. Now in for 25,000.
Expect upside in six months.
Correction, my email should have stated 2 million new shares since announcement of the mandatory conversion and at $6.25 Canadian.
Incrementally setting new highs is good. Still a thin market with very low volume trading. Often significant differences in ask and bid. It doesn’t take much to move the price up or down. If you tried to sell 10,000 shares you would drop the price significantly.
With the debenture conversion effective end of today, there are 10 million new shares out there (with a basis of US$6.25 per share). There may be some profit taking this month.
It is unfortunate the earnings report has not yet come out (not even a date). This creates uncertainty although that doesn’t seem to have held back the stock price so far.
The stock was over US$8 in October. 90 days ago the stock price was in the low US$4s. We could be in for a roller coaster.
Yes, good article. Thanks for posting.
I agree with the assessment that future value will depend on sales of high margin internal brands. To grow such sales, I think Origin House will need to invest in current production capacity and buy new capacity (125,000 sq ft really isn't that much). That growth will require cash and stock issues (including cash to cover operating losses until they get there).
There is never any discussion of competition in these articles (Flow Kana and its $125 million private equity war chest?).
I continue to worry about cash reserves. The article references $75 million, but $13.5 million of that will go with Trichome when it completes its RTO in two months (I got this from investor relations and the Trichome CEO). Another $2.5 million just went to 180 Smoke sellers on the close of that deal. Loans to external brands take up cash and drive lower margin distribution revenue (as stated in the article). How much cash was used to cover operating losses in 4th quarter 2018 and 1st quarter 2019?
I do think Origin House is undervalued relative to other leaders in the cannabis sector based on price to sales ratios.
The stock may dip significantly when the next ER comes out, but it should recover if they can raise additional capital to build a large enough cash war chest to pull of their strategies. Hold on for a bumpy ride. Prepare to buy the dip and/or with new developments.
I think Origin House would definitely take off with an order of magnitude deal (move to larger stock exchange?, merger with large producer?, $1 billion investment from Molson?, ???).
Are you looking at valuation based on price to sales ratios?
On that basis, I agree that Origin House is undervalued. And if you are in the stock long, as you say, than I think there will be an increase in valuation. When that increase happens, and how bumpy it will be along the way, is something to contemplate (I wouldn’t be surprised if the stock drops to the mid 5s post ER).
The valuation based on PSR assumes the comparables are reasonable and profitable. Many if not all are not.
Most likely the comparable ratios, and so valuations, will come down. There is a lot of room in between for Origin House value, and so stock price, to increase and “catch up” with the big players. To do that, I think it must raise additional capital. That might be challenging if the next ER reflects the challenges in the space (slower revenue growth than expected, lower margins, increased operating costs, higher losses, increased competition, negative impacts of regulations). Stock issues to pursue acquisitions and convertible debt to raise cash to fund strategy might cause dilution and drop the stock price during 2019.
I hope you were trying to be funny. Perhaps I mistook the purpose of this blog - is it for cheerleading or serious discussion?
In an email several days ago I listed my concerns and gave everyone a heads up. The next days the stock went from a high of $7.25 down to the mid 6 range. You all had time to adjust if you needed/desired.
I think the stock may go even lower after the next ER. My main concern is that current cash is not enough to be successful and new funding will dilute the stock price further. It may be a good time to get back in if/when Origin House is successful raising cash.
Thoughts?
Anyone have thoughts/concerns/scoops here?
Yeah, but edible and thrill don’t rhyme.
No cash flow no cry, Rastadolla
Good bump today. I took advantage and eliminated my positions in ORHOF. Made a small profit (good considering how far in the red I was in December).
I have a feeling there is a dip coming in the next two months, maybe just before/after the ER (is that scheduled for 4/30?). That could present a buying opportunity at PPS levels significantly below today's level.
My concerns are:
- Slower than projected revenues (California cannabis tax $ are not as expected)
- Mounting expenses and overhead to complete ORHOF's transformation (with leftover royalty investments that do not support current ORHOF strategy and that are using up cash - Trichome/$13.5 million, AltMed/$8 million)
- Canadian government near term limits on the number of cannabis dispensaries (impacting the value of the 180 Smoke acquisition)
- Emergence of CA distributor competitors, such as Flow Kana who just raised $125 million, and
- Insufficient cash to support ORHOF strategy (raising cash by issuing additional stock will most likely dilute current share price).
There could be something else coming - ORHOF getting acquired?
Thoughts anyone?
I sold some ORHOF shares today at $6.92 and $6.85. Volume was 322,000, a bit above the average daily of about 310,000. A pretty thin market. The bid and ask spread is sometimes quite far apart.
My sell order was filled in weird odd lots, the last being ONE SHARE at $6.85 with one minute before the market closed. Who buys one share?
The closing price for ORHOF stock was $6.81, a lower trade that came in seconds after the one stock $6.85 trade and seconds before the close.
ORHOF previously attempted to sell its stake and royalty interest in Altmed to Tidal Royalty. That deal fell through. How does an equity stake in Altmed support ORHOF’s transformation from a royalty/venture capital business model to an operator (producer-distributor in California and retail sales in Canada)?
How does the 51 million shares shown here reconcile with the 61 million shares stated in the last ER and with the 72 million shares stated post the recent conversion of debt to stock?
Perhaps this conversion to stock at $6.25 per share caused the drop in price today. Dilution?
Anyone know something about Flow Kana? Orhof competitor?
They boast significant California distribution capacity and serious financial backing.
https://www.marketwatch.com/story/the-weed-middleman-that-expects-to-make-billions-as-the-sunkist-of-pot-2019-01-11
It might be exciting or it might be a distraction from current strategy. Orhof leadership has publicly made the case that it is moving away from a royalty/VC model and that a direct player retail strategy is best for Canada. This loan involves financing the production capacity of an unaffiliated Canadian grower. How does that fit with a retail strategy?
It would be nice to know if Orhof is changing its Canadian strategy so that investors have a chance to decide if it makes sense. It would be good to understand if this is signaling a change in strategy (vertical integration?) or perhaps involvement with Canapy Growth (acquisition?).
Hi all. New to this site.
Does someone have a thought on how ORHOF/Trichome's recently announced $3.5 million loan to Jeffrey E Wagner Cultivation Corp fits with ORHOF's Canadian strategy (invest in retail)?