General Cannabis Corp (OTCMKTS:CANN) is a stock that’s been powering higher in a monster uptrend for the past six weeks in a rally clearly powered by a couple key dynamics. First, according to two independent polls, California is highly likely to vote to legalize marijuana for recreational use in three weeks, instantly tripling the size of the legal cannabis market in the US; and second, the Company recently closed on $3 mln in financing to expand business and consolidate liabilities at more favorable terms.
That said, Thursday saw a stumble when the company had to react to a probe on the existence of promotional materials. Specifically, the company was made aware of and requested by the OTC Markets Group, Inc. to comment on recent trading and promotional activity concerning CANN common stock. And comment they did. More than likely the dynamic came too early in the process to work for shorts for more than a day trade. With a float of just $9.2 mln shares and a clear explanatory impetus for volume data based solely on the dynamic in play with the company’s market segment in front of the November 8 vote, this hardly seems a fatal wound. Bullish trends do not die of headline-driven price shocks like this. They die of exhaustion or the blossoming of the catalyst driving the trend.
General Cannabis Corp (OTCMKTS:CANN) frames itself as General Cannabis Corp (OTCMKTS:CANN) trumpets itself as a company that provides services to the regulated cannabis industry in the United States. The company engages in the acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners; and provision of security services, including on-site professionals, video surveillance, and cash transport to licensed cannabis cultivators and retail shops.
It also designs, distributes, and sells apparel featuring graphic designs; and offers consulting services to the cannabis industry that comprise obtaining licenses, compliance, cultivation, logistical support, facility design, and building services. In addition, General Cannabis Corporation provides shared office space, networking, and event services; and leases cultivation equipment and facilities.
The company was formerly known as Advanced Cannabis Solutions, Inc. and changed its name to General Cannabis Corporation in June 2015. General Cannabis Corporation was founded in 2013 and is headquartered in Denver, Colorado.
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As noted above, on October 12, 2016, OTC Markets informed the Company that it became aware of certain promotional activities concerning General Cannabis and its common stock. OTC Markets informed the company that it had received copies of promotional newsletter emails encouraging investors to purchase the Company’s common stock. The Company has been informed that this promotional activity coincided with higher than average trading volume in the Company’s stock. The Company was unaware of the promotional activity until informed by OTC Markets and is unaware of the full nature and content of this promotional activity, the responsible parties and the extent of the email newsletters’ dissemination.
According to the release, “General Cannabis Corporation states definitively that the Company, its officers, directors and, to the Company’s knowledge, its controlling shareholders have not, directly or indirectly, authorized or been involved in any way with the creation or distribution of promotional materials including these email newsletters; and that the Company, its officers, directors and, to the knowledge of the Company, any controlling shareholders, have not sold or purchased the Company’s securities within the past 30 days other than as specified below.”
Further, the Company has not issued any shares or convertible instruments allowing conversion to equity securities at prices constituting a discount to the current market rate at the time of the issuance other than disclosed in its Form 8-K filed with the Securities and Exchange Commission on September 26, 2016 disclosing the offering pursuant to which the Company issued an aggregate of 4,500,000 Series A Warrants exercisable at $0.35 per share and 4,500,000 Series B Warrants exercisable at $0.70 per share, none of which have been exercised.
“The Company is not aware of the promotional materials’ author or its affiliated entities or persons. The Company’s recent press releases have reported on and provided disclosure of legitimate and ongoing corporate activity only, and are not part of any promotional activities or campaign,” stated Robert Frichtel, CEO of General Cannabis. The Company encourages those interested in the Company to rely solely on information included in its press releases combined with its filings and disclosures made with the Securities and Exchange Commission.
Even with the stumble on the news, the chart shows a bit less than 200% added to share values of the name over the past month of action. In addition, CANN stock has registered increased average transaction volume recently, with the past month seeing topping 700% beyond what we have been seeing over the larger time frame. Traders should note this as important given the stock’s very limited trading float of 9.2M shares. This type of thing is something to watch out for: a jump in average daily transaction volume in a stock with a restricted float can unleash fireworks as supply is squeezed.
This is a story most of Wall St is currently watching, these once sleepy stocks are starting to garner real interest from investors. Now commanding a market cap of $49.1M, CANN has very little cash on the books, with total assets above $3.5M, which compares with an appreciable load ($2.59M) of total accumulated debt. CANN has a small trading float of just 9.2m, which suggests the stock could launch higher on any additional influx of interest. And the company is making real money, with trailing twelve month revs already coming in at $2.67M, on quarterly y/y revs increasing at 64% according to the company’s latest 10-Q. While we normally reserve very little mercy for our interpretation of rallies driven solely by paid promotional materials, this does not fit that description. We would wait until November 9 to act on bearish instincts here. For continuing coverage on shares of $CANN stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!