Cronos Group: Too Much Cash, Too Soon – Making The Bear Case

Cronos Group: Too Much Cash, Too Soon - Making The Bear Case

Kronos was the first “pot stock” listed on the Nasdaq.

Based in Toronto, Canada, the company was the first “pot stock” listed on the NASDAQ by the Toronto Stock Exchange (TSX) in March 2018.

Early investors will notice that the company’s stock skyrocketed from about $7 shortly after it went public to what he called a “high” of about $22 in February 2019, but unfortunately, the rise was short-lived. Aside from a brief spike to $10 in January 2021, the stock, currently trading at $3.15, has fallen 58% over the past 12 months.

The company has a strong cash position of about $1 billion, but in fiscal 2021 lost $395 million.

Net loss for the 122nd quarter was $32.6 million on earnings of $25 million. The problem is that the United States reluctance to legalize marijuana at the federal level leaves little opportunity for Cronos to put its money to good use in a largely stagnant market.

As a result, we can see that Cronos’ market capitalization is shrinking at the same pace as its capital. Meanwhile, lead investor Altria can exercise the option to increase its stake to 50% or more.

Night sky with fireworks shaped as a weed leaf.(series)

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Investment Thesis

Most of the publicly traded Nasdaq-traded cannabis growing and distribution businesses, whether recreational or medical, have seen their stock prices plummet over the past 12 months, with Kronos Group (NASDAQ: CRON) being an exception.

 

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With more than 600 employees employed, and limited international opportunities in a country that has adamantly refused to open its markets and permits the use of cannabis for medical purposes, funding is likely to run out.

So it’s easy to give Cronos a bearish stance. At his current burn rate, he is 2023. The only thing likely to save the company is for the US to legalize marijuana at the federal level — already decriminalized, but on a schedule defined by the FDA and DEA as having “no therapeutic value.”

Also ReadCardiff’s City Road Has Been Cleared Of A Massive Cannabis Plantation

Recent Developments in the US

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The Cannabis Control Opportunities Act was introduced last week by Senate Majority Leader Chuck Schumer. If passed, it would remove marijuana as a Schedule I controlled substance.

Cory Booker led the discussion, highlighting issues such as social injustice and the amount of police time that can be wasted chasing cannabis smokers. He told the Senate that more people were arrested for cannabis than all violent crimes combined in 2019. Booker also said 91% of Americans approve of medical marijuana. , 68% said they favored adult use.

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