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NASDAQ  CANNABIS LISTING WATCH


One of the biggest catalysts for a cannabis stock is 2019 is to uplist to a major stock exchange. On average listing did nothing for stock appreciation, declining 14.5 percent.

OrganiGram's stock will uplist to the Nasdaq Global Select Market, and the symbol will be changed from “OGRMF” to “OGI.” On the news, the stock is trading above $8 to a market cap of $1.7 billion. The uplisting news comes on the heels of OrganiGram posting strong FQ2 results last month. For the quarter ended February 28, the cannabis company posted revenues of C$26.9 million that doubled the prior quarter. The Canadian company has made a focus on the adult-use market, and the results are shining. As opposed to some more significant players chasing global expansion and consumables market that aren’t even open yet, OrganiGram is focused on producing in the Canadian markets that are already open for business. For the quarter, the company generated an impressive adjusted EBITDA of C$13.3 million for a margin of 49%. OrganiGram achieved this target by refraining from wild expenses with SG&A costs that included stock-based compensation at only 21% of net revenues. As well, cultivation costs were a minimal $0.85 per gram of dried flower harvested.

A significant part of the story is that the company is perfectly positioned to reach production targets of 113,000 kg by the end of 2019. The best part of the expansion plans are that OrganiGram isn’t aggressively trying to supply the world with cannabis, but the company is still tripling expansion to meet demand growth as the Canadian market slowly shifts from illegal to legal sources. The additional Phase 5 expansion will provide the company with the ability to enter the derivatives and edibles market as it opens up later this year. Vape pens and edibles offer some promising high-margin revenue sources as 2019 ends.

Takeaway: With annualized revenues topping $100 million in the last quarter before further expansion and the stock trading at only $1.3 billion, OrganiGram provides a questionable valuation of $1.7 billion. Based on OrganiGram's Business Model, it will never return a profit to the shareholders because of the probability that the marketing capitalization excess intrinsic value.


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