Technical Spotlight on MedReleaf Corp (OTCMKTS:MEDFF)

Technical Spotlight on MedReleaf Corp (OTCMKTS:MEDFF)

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MedReleaf Corp (OTCMKTS:MEDFF) was one of the most remarkable outperformers among OTC cannabis plays from September to early January, rising from roughly $6/share to $25/share in just under 4 months. However, over the past 3 weeks, this torrid trend has begun to falter, and investors are likely looking for answers… and key technical levels.

With the stock’s 50-day simple moving average breaking this week, the sense of a failing trend is probably quite compelling right now. But we would suggest that this may be precisely the time to start monitoring the company’s catalysts for a new opportunity. As a case in point, the company just announced that it has closed its previously announced offering, on a “bought deal” basis, pursuant to a short form prospectus, of an aggregate of 5,000,000 units of the company at a price of $26.50 per unit for aggregate gross proceeds to the company of $132,500,000.

MedReleaf Corp (OTCMKTS:MEDFF) promulgates itself as a company that “sets The Medical Grade Standard & trade for cannabis in Canada and around the world.”

The first and only ICH-GMP and ISO 9001 certified cannabis producer in North America, MedReleaf is a R&D driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis.

Sourced from around the world and perfected in one of two state of the art facilities in Ontario, MedReleaf delivers a variety of premium products to patients seeking safe, consistent and effective medical cannabis.

According to company materials, “MedReleaf sets The Medical Grade Standard™ for cannabis in Canada and around the world.  The first and only ICH-GMP and ISO 9001 certified cannabis producer in North America, MedReleaf is a R&D-driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis.  Sourced from around the world and perfected in one of two state of the art facilities in Ontario, MedReleaf delivers a variety of premium products to patients seeking safe, consistent and effective medical cannabis.”

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As noted above, the company just closed on a new funding round. The stock has been correcting in a steep pullback over the past few weeks, recently breaking under its 50-day MA. The move has also taken shares under the stock’s January lows and the critical intraday pivot highs logged back in November, both at roughly $15.25.

According to the company’s most recent release, “each Unit consisted of one common share of the Company and one-half of one Common Share purchase warrant. Each Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $34.50 (subject to adjustment in certain circumstances) until January 31st, 2020. In addition, in the event that the volume weighted average trading price of the Common Shares for ten consecutive trading days exceeds $51.75, the Company has the right, on written notice to the holders of Warrants, to accelerate the expiry date of the Warrants to the date that is 15 trading days’ following the date of such notice.”

As noted in the release, the company has communicated that it intends to use the net proceeds from the funding round to finance another acquisition or construction of “additional cannabis production and manufacturing facilities in Canada as well as in other jurisdictions with federal legal cannabis markets, where warranted by the opportunities available to MedReleaf, and the expansion of the Company’s marketing and sales initiatives.” The company also noted that, if the Over-Allotment Option is exercised, it intends to use the additional net proceeds to plug up any other day to day holes in operational funding.

At this time, carrying a capital value in the market of $1314.1M, MEDFF has a significant war chest ($74M) of cash on the books, which is balanced by about $9.7M in total current liabilities. One should also note that debt has been growing over recent quarters. MEDFF is pulling in trailing 12-month revenues of $41.1M. However, the company is seeing recent declines on the top-line on a sequential quarterly basis, with revenues falling at -6.1% as of its latest reporting period. We will update the story again soon as developments transpire. Sign-up for continuing coverage on shares of $MEDFF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $MEDFF, either long or short, and we have not been compensated for this article.

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