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Thursday, December 3, 2020

Why Auxly Cannabis Group Inc (OTCMKTS:CBWTF) Could be Facing Rock Bottom

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While much of the cannabis space appears to begin some sort of recovery or bounce phase, shares of Auxly Cannabis Group Inc (OTCMKTS:CBWTF) persist in their doldrums, and investors and traders likely want to understand where the base will come into play. The risk is likely growing on technical basis given that the stock is now testing some key levels with stops sitting under the pattern below the $0.50.

To make matters more interesting, the company just announced that it has received approval from the TSX Venture Exchange to amend the conversion price under its 6% unsecured convertible debentures in the principal amount of $100,000,000 maturing on January 16, 2020, from $1.55 per share to $0.74 per share.

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 it has received approval from the TSX Venture Exchange to amend the conversion price under its 6% unsecured convertible debentures in the principal amount of $100,000,000 maturing on January 16, 2020 from $1.55 per share to $0.74 per share.

The stock has suffered a bit of late, with shares of CBWTF taking a hit in recent action, down about -2% over the past week. Furthermore, the listing has seen a jump in recent trading volume to the tune of 20% over what the stock has registered over the longer term.

According to the release, “The Company will provide written notice (the “Notice”) to holders of Debentures advising them of the proposed reduction in the conversion price and providing holders with the opportunity to immediately convert the principal amount of their Debentures at the revised conversion price. If a holder consents to the reduction in the conversion price but fails to elect to convert the outstanding principal amount of its Debenture within the time specified in the Notice, the Company will have the right to prepay all or any portion of the outstanding principal amount of a consenting holder’s Debenture at any time on or prior to January 16, 2020. Should no Debentures be converted, Auxly has sufficient cash available to repay the Debentures when they come due.”

Currently trading at a market capitalization of $346M, CBWTF has a significant war chest ($119.5M) of cash on the books, which compares with 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%. We will update the story again as soon as developments transpire. 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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