Why the Bounce is Back in Auxly Cannabis Group Inc (OTCMKTS:CBWTF) Shares

Why the Bounce is Back in Auxly Cannabis Group Inc (OTCMKTS:CBWTF) Shares

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The path higher has been hampered for Auxly Cannabis Group Inc (OTCMKTS:CBWTF) in recent action, with shares falling back down to retest key support in the $0.55/share area last week. This follows strength over the summer that had rekindled hopes of a coming breakout and some serious catch-up action that would make up for lost ground on a relative basis. However, we may be seeing that hope rekindled once action, given the strong action in the name over recent days.

Helping to push and focus that action, the company just announced that its transaction with Imperial Brands PLC has closed. According to the release, “As announced on July 25, 2019, Imperial Brands invested C$123 million by way of a debenture pursuant to the Transaction, which is convertible into 19.9% ownership of Auxly. Imperial Brands grants Auxly global licenses to its vaping technology, access to its vapor innovation business, Nerudia, and will use Auxly as its exclusive partner for the future development, manufacture, commercialization, sale and distribution of cannabis products of any kind anywhere in the world.”

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 just announced that its transaction with Imperial Brands PLC has closed. 

Traders will note 3% added to share values of the company over the past week of action. What’s more, the stock has witnessed a pop in interest, as transaction volume levels have recently pushed 18% above its longer-run average levels.

“We are delighted to announce the closing of this transaction to formally mark the start of our strategic partnership with Imperial Brands,” said Hugo Alves, Chief Executive Officer of Auxly. “We believe there is considerable opportunity for growth and value creation for both companies. We are looking forward to working with the incredibly strong team at Imperial Brands as we prepare to launch our portfolio of branded derivative products, formulated and manufactured at our subsidiary, Dosecann, later this year.  We welcome Imperial Brands’ experience and expertise on our Board and on our Safety Committee to help ensure that all of our branded products are produced to Dosecann’s exacting standards of quality, safety and efficacy and earn the trust of Canadian consumers.”

Earning a current market cap value of $362M, CBWTF has a significant war chest ($119.5M) of cash on the books, which stands against about $122.4M 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 $4.7M. In addition, the company is seeing recent top-line growth, with sequential quarterly revenues growing at 238.1%. 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.

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