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Wednesday, October 28, 2020

Hemp Inc (OTCMKTS:HEMP) Remains the Archetypal Laggard

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Hemp Inc (OTCMKTS:HEMP) has been perhaps the archetypal “laggard” in the process of surging interest in cannabis-related stocks this Fall as a consequence of the landmark vote on November 8. HEMP stock has consistently underperformed the group at each stage. We were well out in front of this story, noting that it did not make sense to lump this company into the pot stock basket.

We also have been somewhat skeptical of this one for both its difficult past and its glaring inflationary dilution of shareholder interest from March to June of this year. Shares are at present unmoved from those levels despite enormous interest in the larger space. We would continue to be somewhat careful with this stock, though there may be some potential here as well, particularly after recent reports that its wholly owned subsidiary, Industrial Hemp Manufacturing, LLC (IHM) in Spring Hope, North Carolina is set to grow 50 acres of industrial hemp next door to their NC processing plant in the Spring of 2017.

Hemp Inc (OTCMKTS:HEMP) was founded in 2008. According to company information, the company’s long-term goal is “to be the leader in the industrial hemp industry in America”.

The company understands its mission to be a provider of “green solutions that help make the world a better place to live. We support products that are eco-friendly, organic, healthy, and solutions that replace many petroleum-based products.”

The narrative the company spins includes the idea that “In a forward-thinking move, Hemp, Inc.’s wholly owned subsidiary Industrial Hemp Manufacturing, LLC purchased the largest decortication plant in North America, which is located in Spring Hope, North Carolina. The plant is housed in a 70,000,000 square foot warehouse on 9 acres. The company will start producing fiber, loss circulation materials (LCM) and absorbents from kenaf and later from hemp.”

That narrative continues forward to include the concept that “Hemp, Inc. will produce a product for drilling rigs called “lost circulation material” (LCM), which is used for maintaining the seals when drilling for water, oil, gas, and any other liquid or gas. This product alone is capable of producing millions of dollars in revenue, since some of the largest oil companies in the world will be our primary customers.”

“Eventually, the company will produce fiber materials for the paper and fabric industries, and other industries that utilize materials from hemp to make products such as plastics, building materials, health and beauty related products and more.”

Hemp, Inc. has stated that it plans to purchase, acquire and/or joint venture with complimentary companies across various sectors of the hemp industry in an effort to “build a portfolio of synergistic businesses that will bring Hemp, Inc. cash flow, revenues, value, and position us as a leader in the industrial hemp industry.”

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As noted above, the company is ramping up toward an expansion.

“According to executives, however, the Spring planting of industrial hemp hinges on the North Carolina Industrial Hemp Commission (NCIHC) establishing the rules and regulations for the state’s agriculture program to grow or cultivate industrial hemp. While the Commission has not yet announced a date of when the rules and regulations will be established or released, farmers across the state are hopeful it will be in time to plant hemp during the Spring next year. With more families “going green,” farmers see more lucrative opportunity in the environmentally sustainable hemp crop than with any other crop.”

Bruce Perlowin, CEO of Hemp, Inc. said, “Not only are we excited at the possibility to grow our own 50 acres of hemp in the Spring, we are also partnering with landowners and farmers across North Carolina to grow hemp, such as the 1,500 acres we announced in a previous press release, while we complete the final stage of bringing our multi-purpose industrial hemp facility in North Carolina online. We’ve planted Kenaf successfully. Now we are ready for hemp.”

At this time, carrying a capital value in the market of $22.2M, HEMP stock has very little cash on the books, with total assets approaching $6.8M, which must be weighed relative to almost no total accumulated debt. Moreover, the company has seen an influx in interest of late, with the stock’s recent average trading volume running greater than 170% above its longer-run average levels. In addition, HEMP is making real money, with trailing revs already coming in at $2.36M. We will continue to watch HEMP stock closely, and let you if our sense of the stock shifts. For continuing coverage on shares of $HEMP stock, as well as our other hot stock picks, sign up for our free newsletter below and get our next hot stock pick!

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