Quinsam notes “tough environment” for cannabis stocks
Quinsam Capital Corp. has discussed the recent decline in share price in cannabis-sector stocks.
QUINSAM CAPITAL Corp. has provided an update to its investors in light of recent declines in the share prices of many cannabis companies.
“There has been acrossthe-board weakness in cannabis share prices in recent weeks,” said Roger Dent, chief executive officer of Quinsam. “We think that the weakness has been caused by a number of factors. In some cases, shares were likely overvalued. We have also seen an impact from buyer exhaustion due to the very large number of new issues and tax-loss selling. We have seen some disappointments in operational results and we have seen an impact from the short-sell report on Aphria Inc. All in all, it has been a pretty tough environment in the sector. “While the stock market has cooled, in our opinion the secular growth opportunity in cannabis remains intact. We remain strong believers in the sector and continue to find opportunities that we think are very attractive. Lower share prices improve the outlook for future performance.”
Quinsam has been increasingly pleased with its decisions to exit many names over the last few months. Quinsam announced a number of divestitures in its press release of Oct. 24, 2018. Since that date, the company made additional divestitures including its remaining shares in GTEC, C21, Next Green Wave and Biome. The company completed the sale of all of its Planet13 Holdings shares following its warrant exercise. The company also took profits in Green Growth Brands.
While Quinsam has taken profits in a large number of names over the last six months, it has added to two of its Canadian Access to Cannabis for Medical Purposes Regulations (ACMPR) holdings: Ndiva and Eve & Co. “In both cases, we see them as sound businesses with attractive valuations and the prospect of near-term cash flow generation,” said Mr. Dent. “In the universe of publicly traded Canadian ACMPR operators, these two together with Sproutly are currently the most interesting opportunities we see.” Quinsam continues to focus most of its new investments on opportunities outside of Canada.
Largely due to delays brought on by the large volume of new issue activity and associated backlogs with listing applications, some of the liquidity events that the company highlighted in its press release of Oct. 2, 2018, have been deferred. However, at this time, the company currently expects all of these liquidity events to proceed in either the fourth quarter of 2018 or Q1 2019. “We expect Quinsam to see a solid number of liquidity events in Q1 2019,” said Mr. Dent. “Given that our results depend on future market activity, we do not forecast our performance. However, we can say that at present we expect our investments to strongly outperform the cannabis sector in Q4 2018. We note that our quarter to date includes some large wins including Acreage, Xanthic/Green Growth Brands and Cannamerica. At the same time, we have seen some of our winners give back part of their gains, including Sproutly and Rocky Mountain. Regardless of the Q4 result, our shares trade at a strong discount to our net asset value and our issuer bid has been an active buyer, with 570,000 shares purchased in November, 2018,” said Mr. Dent.
About Quinsam Capital Corp.
Quinsam is a merchant bank based in Canada that is focusing on cannabis-related investments. The company’s merchant banking business may encompass a range of activities including acquisitions, advisory services, lending activities and portfolio investments. Quinsam invests its capital for its own account in assets, companies or projects which the company believes are undervalued and where it sees a viable plan for unlocking such value. The company does not invest on behalf of any third party and it does not offer investment advice.
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Peter Bilodeau, Terry Dale Booth, Roger Arnold Dent, Hugh Ross Geddes, Anthony Ralph Roodenburg, Eric Szustak, Adam Kelley Szweras
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