We took a bullish view on shares of Auxly Cannabis Group Inc (OTCMKTS:CBWTF) in several recent pieces given both technical and fundamental catalysts, and a sense that the stock has been sort of “left behind” in the cannabis space as other names raced ahead over the past year. As we have noted, the company has productively shifted its business model from a royalty strategy to a joint venture cultivation strategy, giving the company greater control over cost structures as the space experiences tightening margins through the increased commoditization of cannabis-related products.
That change in strategy was recently put on much stronger footing by the company’s recent announcement of a $123 million strategic investment in Auxly by Imperial Brands PLC by way of a convertible debenture. The deal also grants Auxly global licenses to Imperial Brands’ vaping technology and access to its vapor innovation business, Nerudia.
Auxly Cannabis Group Inc (OTCMKTS:CBWTF) trumpets itself as an investment company that seeks to provide investor returns through streams and capital appreciation in the Canadian cannabis industry.
The company operates as a cannabis streaming company. It provides funding for cannabis facility expansions, operations, and initial construction in exchange for minority equity interests and a portion of the cultivation production.
The company was formerly known as Knightswood Financial Corp. and changed its name to Cannabis Wheaton Income Corp. in May 2017. Cannabis Wheaton Income Corp. was incorporated in 1987 and is based in Vancouver, Canada, and became known as Auxly Cannabis Group Inc over recent months.
According to company materials, “Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our partners all have different visions, voices and brand values, and all share a common goal—to build a world-class industry based on ethics, diversity, quality and innovation.”
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As noted above, CBWTF has been on the move as investors see a more sustainable model in place along with a major strategic investment and access to Imperial Brands’ vaping technology and its vapor innovation business.
Recent action has seen 27% tacked on to share pricing for the listing in the past month. Moreover, the company has seen a growing influx of trading interest, with the stock’s recent average trading volume running 170% above its longer-run average levels.
“This investment from Imperial Brands will enhance Auxly’s ability to continue to deliver on our business plans and accelerate our growth initiatives to expand our portfolio of branded derivative products,” said Hugo Alves, President of Auxly. “The timing is ideal as we prepare to bring our portfolio of innovative cannabis products to the Canadian market following the legalization of edibles, extracts, and topicals later this year.”
Earning a current market cap value of $457M, CBWTF has a significant war chest ($168.4M) of cash on the books, which compares with about $115.4M in total current liabilities. One should also note that debt has been growing over recent quarters. CBWTF is pulling in trailing 12-month revenues of $2M. In addition, the company is seeing recent top-line growth, with sequential quarterly revenues growing at 26.3%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $CBWTF 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 $CBWTF, either long or short, and we have not been compensated for this article.