Danish medical cannabis firm DanCann Pharma endured a dramatic decline in share price value this week after publishing a flurry of updates.
Since Monday, August 29, DanCann’s stock price plummeted 60% on the Swedish Spotlight Stock Market, dropping from DKK 2.5 to DKK 1KR.
The sell-off largely took place on Wednesday, August 31, seeing trade volumes increase more than tenfold following the delayed release of DanCann’s Q2 results.
On the same day, the company also revealed plans to ‘resolve on a partially guaranteed rights issue’, understood to be only 77% subscribed, netting DKK 28.5m in the process.
Not only were its shares issued at the equivalent of DKK 0.6 per share, a significant discount on its share price even after Wednesday’s sell-off, but DanCann says it has also taken out a DKK 3m loan to ‘secure the company’s liquidity until the conclusion of the right issue’.
This unusual activity has left many investors questioning why the company appears to be in such desperate need of funding.
According to DanCann, which has called for an Extraordinary General Meeting (EGM) on September 20, 2022 for shareholders to vote on this proposal, the purpose of the rights issue is to secure financing of the approval of its GMP facility and to get new products on the market.
It added that the proceeds from the rights issue ‘are expected to be sufficient to finance the company’s business and reach break-even status’.
During the three months to June 30, 2022, DanCann reported net sales of DKK 771,000, down significantly from the DKK 1,266,000 it made in the previous quarter.
Jeppe Krog Rasmussen, CEO of DanCann Pharma, said this drop in revenues was ‘due to overlaps (Q2 to Q3) between our deliveries to the wholesalers, for which we expect this to be balanced in Q3 2022’.
Operating losses for the period also came in at DKK 5.7m, up from the DKK 3.5m in the previous quarter and DKK 3.5m in the same period a year earlier.
All this came just days after DanCann announced it had signed a DKK 40m supply agreement with Weeco Pharma GmbH for the German market during the period 2023 to 2025.
This agreement, which is expected to see the first shipment take place in May 2023, is understood to be subject to DanCann receiving its EU GMP certification.
Yooma Wellness also published its interim results this week, but experienced a much more subdued response from investors.
After reporting a $33m loss for 2021 in its delayed FY results in May, Yooma appears to have managed to get a handle on its losses.
In the three months to June 30, 2022, it reported a comprehensive loss of $1.2m, a significant improvement on the $3.1m loss reported in Q1 this year.
According to Yooma’s CEO, Jordan Greenberg, this represented ‘some early results from the streamlining and rationalisation exercise that we undertook earlier this year in the form of reduced expenses for the quarter’, a trend it says is expected to continue in the near term.
“The Company also continues to explore opportunities for the sale of assets or further M&A if financing can be secured on acceptable terms.”
Revenues for the period came in at $3.3m, just beating the $3.2m sales reported in Q1, and up from $2.7m a year earlier.
Gross profits also increased from $783k in Q1 to $967k during the period, and were up nearly five-fold year-on-year.
In July, multi-sector AIM-listed portfolio investment firm SEED Innovations, which holds a 4.4% stake in Yooma Wellness, said that the ‘very disappointing’ performance of the company had a ‘major impact’ on its net asset value (NAV), which dropped 21% in the 12 months to March 31, 2022.
According to SEED, after investing in Yooma’s C$10.3m fundraise at an average cost per share of C$0.39, by the end of SEED’s financial year this had dropped to C$0.13, noting that the ‘stock has seen a further dramatic decline since that time’.
Proposed Rule Changes on AQSE
The Aquis Stock Exchange (AQSE), one of the most popular exchanges for small cap cannabis companies seeking public funding, has proposed a number of changes which could affect these companies moving forward.
Firstly, AQSE has put forward proposals to raise the minimum market cap for admission to the ‘Access’ section of its Growth Market, which is specifically tailored to small cap companies.
Currently the minimum market cap stands at £700,000, but this could now be raised to £2m amid suggestions companies below this value may not have enough liquidity for a public market.
The proposals, which are subject to a public consultation which ended today, would also reportedly see the minimum number of market makers on admission rise to two, and would prevent any speculative securities from being listed.
It is not yet clear whether companies which fall below a value of £2m will face delisting. BusinessCann has approached AQSE for comment.
Elsewhere, AQSE has changed the wording in the sanctions section of its regulations, removing any reference to the upper limit for penalty fines being £100,000, suggesting this could be raised indefinitely.
Just this week, AQSE-listed CBD brand Love Hemp received the maximum penalty fine of £100,000 from AQSE, which was reduced to £70,000 as part of an early settlement.