Akanda has become the latest NASDAQ-listed cannabis company to enact a stock consolidation in order to avoid delisting from the stock exchange.
Earlier this week (March 8), Akanda announced plans to implement a 1-for-10 reverse stock split on its ordinary shares, with trading to begin on the adjusted shares on March 9.
The move, which effectively means every ten shares held by an investor are automatically converted to one share, thus artificially raising their value significantly, has seen Akanda’s share price jump from $0.19 pre-consolidation to around $1.42 at the time of writing.
While this is still significantly below highs of around $9 seen in the two months following its NASDAQ IPO, almost exactly a year ago, crucially it prevents Akanda from facing delisting from the stock exchange.
In October 2022, Akanda announced that it had received notification from the Listing Qualifications Department warning that it was ‘not in compliance with the minimum bid price requirement’.
Under NASDAQ’s listing rules, securities are required to ‘maintain a minimum bid price of $1 per share’, and should share prices remain below this threshold for ‘30 consecutive days’, companies face being delisted.
This gave Akanda until March 27, 2023, to bring its share price above $1 for a minimum of 10 consecutive business days.
While its share price has recovered slightly from lows of $0.14 in December, a string of issues at the company, resulting in the loss of its CEO and operations in Lesotho, have added another hurdle to Akanda’s organic recovery.
However, Akanda is far from the only cannabis company to employ this tactic to drag its share price out of the mud.
The same month it received its notice from NASDAQ, Akanda’s largest shareholder Halo Collective announced plans to launch its second share consolidation in nine months.
In July 2022, IM Cannabis also received a warning from NASDAQ that its shares were due to be delisted. It, too, used a stock consolidation to inflate its share price in October 2022, seeing its shares return to trading in November.
While IMC’s share price woes have been compounded by its poor financial performance (as discussed in more detail below), other cannabis companies such as Canadian giant Organigram, which reported record revenues and healthy profits in its latest quarter, are also facing a delisting from NASDAQ due to poor stock performance and may have to resort to similar measures to continue trading.
The Danish cannabis biotech company saw its stock jump nearly 50% this week following the release of its Q4 results in late February (28).
In the three months to December 31, 2022, DanCann Pharma reported record sales of DKK2.1m (£250k), alongside an EBIT loss of DKK5.5m (£656k).
For the full year, the company saw sales top DKK5.7m (£679k), up significantly from DKK874,000 (£104k) a year earlier, while losses grew from DKK14.5m (£1.7m) to DKK17.6m (£2.1m).
According to the company, the ‘primary cost drivers were the development of a production facility, operation activities, business development, testing and compliance cost’.
At the end of the period, DanCann’s consolidated current assets were DKK10.7m, consisting of cash, cash equivalents and receivables from corporation tax.
DanCann, and its subsidiary CannGros, which imports and distributes Bedrocan, Bedica and Bediol to Danish pharmacies, is one of the few companies to now be approved by the Danish Medicines Agency under the Danish medical cannabis pilot programme.
In December 2022, it received EU-GMP accreditation for its manufacturing facility, Biotech Pharm 1, enabling it to officially be admitted to the pilot programme.
Founder and CEO Jeppe Krog Rasmussen said at the time: “The fact that we have managed to get the approval in the first attempt says a lot about the spirit of our company. We have been working towards this for the last 3–4 years, and to succeed in the first attempt is very gratifying.
“Through our history we have passed a number of milestones, but this is by far the most important. We are now one of a limited number of companies to have achieved this certification in our industry, which is quite satisfying.
“Now we have taken another step towards our commercialisation, where sales from Biotech Pharm1 can become a reality. We will soon be able to achieve our guidance and goals with our commercial assets in the form of already signed agreements of more than DKK80 million by 2025.”
The embattled cannabis operator this week announced further cost-cutting measures, including a 20%–25% reduction in its workforce.
This will see nearly a quarter of the company’s workforce slashed ‘across all functions’, which IMC says it expects to result in cost savings of C$3.5m a year.
The reduction in staff will see the company’s CFO Shai Shemesh and CEO of its Israeli subsidiary IMC Holdings Rinat Efrima step down, to be replaced with ‘highly skilled internal successors’.
Meanwhile Yael Harrosh, Chief Legal and Operations Officer of the company, has been appointed to lead the ongoing restructuring plan and will be stepping down from her current responsibilities.
As part of ongoing cost-cutting measures to bring its finances under control, IMC announced in November that it planned to pull its operations in Canada and relinquish control of its wholly owned subsidiary Trichome Financial Corp.
In January, IMC announced that a ‘stalking horse bid’ for Trichome had been approved by the Ontario Superior Court of Justice, with a C$6.3m consideration made by L5 Capital, including a base cash purchase price of C$5m.
A stalking horse bid is a preliminary bid made for a bankrupt company’s assets, aimed at setting a baseline price for the assets, which can then be used to solicit additional bids from other interested parties.
In other words, the stalking horse bid is an initial bid made by a potential buyer who has been invited to participate in a competitive bidding process. The bid is typically made before the auction or bidding process begins and is used to help establish a minimum price for the assets being sold. Other bidders are then invited to submit their own offers, and the winning bidder is typically the one who offers the highest price.
This week, IMC informed investors that this process ‘did not result in any bids’ for Trichome, and that L5 Capital has now ‘advised that it will not complete the proposed transaction contemplated by the stalking horse share purchase agreement’.
According to the company, ‘Trichome and the monitor appointed under the Companies’ Creditors Arrangement Act will proceed with the wind-down of the operations of Trichome and the liquidation of its remaining assets’.