Pot-para­pher­na­lia com­pany prom­ises a party

The Globe and Mail (Alberta Edition) - - REPORT ON BUSINESS - CHRISTINA PEL­LE­GRINI

Na­maste Tech­nolo­gies is look­ing to sta­bi­lize its share price and take on short-sell­ers by lit­er­ally fet­ing in­vestors who pledge to hold its stock

Na­maste Tech­nolo­gies Inc., the owner of on­line stores that sell va­por­iz­ers and bongs, is tak­ing un­usual steps to sta­bi­lize its share price and thwart an at­tack on its busi­ness by short-sell­ers.

The small Van­cou­ver com­pany is ask­ing its in­vestors to prom­ise that they won’t sell their shares over the next three months. And as a thanks for those who show proof that they held their shares, Na­maste says it’s go­ing to throw a big party at the end of the sum­mer.

Na­maste in­vestors have had lit­tle to cel­e­brate of late. The stock fell 2.35 per cent on Thurs­day to $1.66, well be­low its late De­cem­ber peak of $4.40 amid a sec­tor-wide sell-off.

In early May, Na­maste shares took a hit when it was the sub­ject of an anony­mous re­search re­port pub­lished on the in­vest­ing web­site Seek­ing Al­pha that de­scribed the com­pany as all hype and warned that it could lose 80 per cent of its value. Na­maste’s at­tempt to vir­tu­ally unite its share­hold­ers is a novel – and cheap – way to try to com­bat cam­paigns launched by short­sellers who stand to profit when share prices fall.

“The rea­son I orig­i­nally did this was to show my com­mit­ment to my share­hold­ers, even though our share price might be down and even though peo­ple might be at­tack­ing us,” said Sean Dollinger, chief ex­ec­u­tive of­fi­cer at Na­maste. “I’m stand­ing strong for us and who­ever wants to join me is wel­comed to.”

As of Thurs­day’s mar­ket close, in­vestors have pledged to hold on to more than 116 mil­lion shares, ac­cord­ing to Na­maste’s web­site. That’s about 40 per cent of the its to­tal stock and in­cludes the 27 mil­lion shares held by Mr. Dollinger and co-founder Kory Zelick­son. In­vestors have until Fri­day to add their names to the list.

“It’s gone ab­so­lutely vi­ral,” Mr. Dollinger said, adding that the com­pany’s lawyers at Gowl­ings LLP vet­ted the idea for the pledge. “It ’s ab­so­lutely le­gal.”

He says Na­maste is the lat­est cannabis stock to be at­tacked by short-sell­ers who pub­lish damn­ing re­search on the firms. He won’t name any but calls their con­duct “ma­li­cious.”

“If you look at the pat­tern on every­body they at­tack, the shares go down, they make all their money and then they get out and the stock re­turns back to its nor­mal level,” Mr. Dollinger said. “It’s stock ma­nip­u­la­tion at its worst.”

Na­maste is an on­line re­tailer of va­por­iz­ers and other prod­ucts used to con­sume cannabis, such as bongs and grind­ing de­vices. It op­er­ates more than 30 web­sites that serve 20 coun­tries, but gen­er­ates the most rev­enue in Bri­tain and Aus­tralia. In the three­month pe­riod to Feb­ru­ary, Na­maste recorded $6-mil­lion in sales, which is higher than what most Cana­dian med­i­cal-marijuana grow­ers are book­ing to­day. The com­pany’s mar­ket cap is $457-mil­lion.

This month, Na­maste agreed to ac­quire Swedish ar­ti­fi­cial-in­tel­li­gence com­pany Fin­dify AB for US$2-mil­lion in cash and US$10-mil­lion in Na­maste stock priced at $1.80 a share. In Feb­ru­ary, Na­maste closed a $40-mil­lion fi­nanc­ing, sell­ing units for $2.55 apiece.

On Mon­day, Sefi Dollinger, Na­maste’s chair­man and Sean Dollinger’s un­cle, sold 20,000 shares in the com­pany for $1.72 each. On April 26, he bought 40,000 shares at $1.52. Sefi Dollinger has since pledged to hold onto his more than 800,000 shares for the next three months.

While the lo­ca­tion of the sum­mer bash is still undis­closed, Sean Dollinger says he al­ready has mu­si­cal tal­ent in mind, some spon­sors lined up and a venue picked out.

In a com­ment posted on the site, an in­vestor hold­ing 1.25 mil­lion shares with the ini­tials J.T. said, “Long and strong baby.” An anony­mous Na­maste in­vestor with 37,500 shares said: “Sell­ing? Nope! I keep adding.”

J.L., with their 3,000 shares pledged, said, “I’ve been hold­ing for the last two years. What’s an­other 90 days?”

Amy Freed­man, CEO of proxy ad­vi­sory firm Kings­dale Ad­vi­sors, says she’s never seen any­thing like Na­maste’s share pledge be­fore.

“The fact that short-sell­ers are un­reg­u­lated is prob­lem­atic for many is­suers as their ex­is­tence and the­o­ries that need not be val­i­dated can weigh on stocks,” she said. But the best defence, she added, is to prove them wrong.

DAR­RYL DYCK/ THE CANA­DIAN PRESS

A ven­dor dis­plays marijuana for sale dur­ing the an­nual 4/20 cannabis cel­e­bra­tion in Van­cou­ver on April 20. Na­maste CEO Sean Dollinger says his com­pany is the lat­est cannabis stock to be at­tacked by short-sell­ers, who pub­lish damn­ing re­search on the firms.

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