readers know itself is diversified – pharma, biotech, animal care, food supplements, topical applications, recreational usage, and so forth.
Creating a merchant bank.
Continuing to explore further investment opportunities.
But with no reported revenue to date this year.
Another reason why LGC makes an ideal case study can be found in the posts found on bulletin boards and on social media. Those that are positive on LGC’s prospects are often overly so just as those sour on the company are overly negative. One negative comment I often have seen is how the criminal element in South Africa another may compromise that operation. First and foremost, according the background link provided at the start of this case study, the South African Government will be providing the security.
The company that LGC has entered into a Joint Venture with is a global company in all aspects of farm to table of the agricultural products they grow and it will be their facilities used. As a rough analogy only, sounds very much like the Emeral Health Therapeutics Inc and Village Farms International Inc joint venture right here in Canada. And please note I used the term “rough analogy”.
On October 31st, LGC announced its first Cannabis deal with Quebec based Tricho-Med Corporation, doing business as AAA Trichomes, to acquire a 49% interest (plus a 5% royalty).
Now back to the elephant in the room - The large quantity of shares issued and outstanding with the potential of at least another 60-million being added assuming that LGC has no additional dilutive financings. Last month, my article was on Supply and Demand and that also touched on the supply and demand of capital from financings as well as shares.
Typically and all things being equal - the greater the supply, the lower the price and the flatter the supply curve. A good example of this would be Aurora Cannabis Inc whereby despite its market cap in excess of $1-bllion, its share price is $2.82 at time of writing and that is because (per www.tmxmoney.com) there are over 375-million shares outstanding. Aphria Inc’s market cap is comparable to that of Aurora’s but its share price is $6.94 because it has 138-million shares outstanding. Is the high share count of LGC truly a matter of concern?
Per sedi, insiders and management own approximately 60% of the outstanding shares and were a significant participation factor in the recent financing. Although in theory insiders and management can sell their holdings, overall this is a level of comfort as the current effective public float is therefore just over 108-million and the total volume of shares traded since May is in excess of 270 million. All that being said, LGC could be one of the cases where a reverse stock split could be to the benefit of shareholders.
To end where we began, the share price of LGC since our inclusion in our Stock list reaced a high of $0.19 before settling back to $0.15 at the close on October 20th. A potential ROI in excess of 300% in just over three months.
LGC is a case study on many fronts: social media and billboard noise with their excessive bashing and/or promoting; diversification; international expansion; hemp; leveraging partnerships (joint venture for example); risks (real or perceived) associated with operating in certain foreign jurisdictions; valuation of the company; and so forth. As for the social media headline spammers and promoters being right – well, you know what they say about a broken clock.
Will LGC grow into its new shoes or could it be an example as to why some compare this industry to the dot-com era? The most recent short position list indicates that there is not a significant amount of shorting interest.
The pool of industry companies with this potential along with a market cap at or less and without US exposure are few and far between. Your case study is to determine if, given your own risk profile, the upside potential outweighs the downside risk significant enough to consider investing. For all of the reasons given combined with the theme of the articles this month, LGC is indeed an ideal case study.
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