My AMJL comment May 6
Although there are those in the market who dispute management's contention that short-sellers are to blame for the stock's weakness, it is hard to dispute the fact of volatile and rapid trades in the last minutes of many sessions. IMO many of these have indeed been attempts to push the price down at the close so as to create fear amongst investors of an imminent sell-off the next day. However, many trades may also have been defensive attempts to counter these trades.
Whatever the truth of the matter, the stock has at least managed to rebound somewhat even while continuing on its longer-term downtrend. It should be noted that the opening price has usually been a few cents higher, which might indicate manipulation to set the tone of trade early on in the session. If so, such a strategy has failed to have its intended effect, as such gains have usually been erased within a few trades.
The main news for Amigula came on Monday with the issue of another company press release. This time, it was issued by "M2 PRESSWIRE via COMTEX", unlike others which have come through "PRIMEZONE MEDIA NETWORK". I am not sure of the significance of this switch. Anyway, I didn't even realize it had been issued until I did a search on Google. Thus, most of the market was probably unaware it had been issued until Tuesday, and thus had no chance to react to its content. And the content was indeed interesting (see previous post for the text of the press release).
Aside from the typos and desperate need for a proper editing job, this release tells us much about the company's strategy. In particular, president Warren Eugene has apparently been getting a very negative response from Health Canada to his lobbying, so he has now decided to declare war on the agency. In other words, he has significantly ‘upped the ante' with the Canadian authorities, in keeping with his background as on online gambling mogul, and now has all his bets riding on the outcome of Bill C-10 and subsequent court rulings.
He is now publicly calling for Health Canada to be removed entirely from the process of regulating the country's medical cannabis program, and is effectively calling for outright cannabis legalization. Thus, it is hard to escape the conclusion that his personal attacks on Health Canada officials could spell doom for the company if the agency continues to be responsible for regulating the country's medical marijuana program in the future. Again, a high-risk, high-return strategy - which exactly fits the investment case for this stock.
We also learn that Amigula's product would cost $1.00 per gram, which undoubtedly is a lot less than many investors had been supposing. (In comparison, the cheapest herb in Netherlands coffeeshops sells for at around $3.00 per gram.) Thus, we roughly calculate that the company would make a gross profit of $298 per pound (based on the previously announced cost figure of $150 per pound, which of course assumes significant economies of scale in their growing operations). In other words, a much smaller margin compared to current rates on the black market.
However, many critics of Health Canada undoubtedly agree with Eugene's opinion, and judging by yesterday's trading (unchanged at $0.29, albeit again on weak volume), the market seems to be in wait-and-see mode. All eyes are now on the fate of C-10, which may be voted on as early as next week.
AI
