iAnthus investors are upset about the rain, ignoring the ocean
Much chatter on pot-stock twitter this am as the eagle eyed @xb0y noticed that iAnthus Capital Holdings (CSE:IAN) filed CSE Form 11 June 6th, proposing the issuing of some new stock options and the effective amendment of the strike price of some existing ones. The adjustment moves certain director, employee and contractor options from a $7.08 strike price to a $5.35 strike price.
— XB (@xb0y) June 11, 2019
iAnthus’ stock options are issued under the direction of an omnibus stock option plan that amalgamated two previous iAnthus plans with a legacy plan from the precursor company that was used for the RTO. The previous IAN plans capped the total stock options outstanding at 10% of the common share equivalents outstanding. The October 15th, 2018 omnibus plan bumped that to 20% of the outstanding share total. All of the limits on compensation built into the plan are based on percentage of the outstanding shares (individuals are caped at 10% of the total, Related Persons capped at 5% of the outstanding total, etc.), which is pretty handy, because that total is a moving target that likes to run.
IAN finished 2018 with 74.1 million common share equivalents outstanding. Between the shares they issued to buy MPX Nutraceuticals, in-kind interest on the debentures, a debt conversion and option and warrant exercises, they finished March 2019 with 159.3M outstanding shares… and counting. The company lists the outstanding total on the June 6th Form 11 at 169.0 Million common share equivalents.
When the dust settles on this new issue, there will be options outstanding equivalent to 14% of the total issue, giving IAN another 6% to work with… at least until the next time they have to make an in-kind interest payment on a debenture, or one of those debentures converts.
The reaction in the cannatwitterverse was equal parts defense and eye-roll, with a lot of “guess that’s the way things go…” and reminders that people need to be ‘incentivised’ to work hard.
— SmallCapSteve (@smallcapsteve) June 12, 2019
We can’t work out whether or not a re-pricing of the option strike-price from $7.08 to $5.35 is supposed to create more or less incentive, but it doesn’t matter. We maintain our opinion, expressed in our US MJ Ecosystem post, that Equity Guru client IAN is not an investment-grade security, and the reason is simple; it hasn’t shown it can earn to keep up with the rate at which it prints paper.
The Last of Tilray’s Privateer?
The Financial Post’s Vanmala Subramaniam reported Monday that Privateer Holdings, the Peter Thiel-affiliated hedge fund with the majority stake in Tilray (NASDAQ:TLRY) will effectively be taking their Tilray stock and giving it to their members as a dividend “in a tax efficient way.”
Tilray CEO Brian Kennedy caught some flack earlier this year when he sold some of his personal Tilray stock following an announced lockup of the Privateer shares in January. Kennedy didn’t really deserve the flack (is he supposed to just sit with most of his net worth in TLRY forever?) but, characteristically, shareholders get their panties in a twist when the person making money isn’t them.
TLRY’s run up past US$100/share in the fall had everything to do with a lack of access to legal cannabis equities in the US, and a minuscule available float, thanks to Privateer controlling 93% of the outstanding common share equivalents. Privater now controls 77%, and the news that the members would be able to sell it at their own discretion got the stock up of the mat a bit. Low floats create exciting action, but they don’t do traders any favours. Evidently, Privateer figured it was time to give these fish some line… let ’em run.
Subramaniam’s reporting is characteristically complete and efficient, so those interested should read the whole thing.
Drink it all in….
The Vancouver Sun’s Nick Eagland was in the paper with an unusually relevant discussion of cannabis beverages, helping a company called Trait Biosciences (private) pull the proverbial fire alarm about nano-technology-based means of making cannabinoids water soluble. Eagland has UBC Assistant Professor Anubhav Patap Singh explaining that there’s a potential for nanoparticles to accumulate in tissues. Trait’s method, whose potential health risks aren’t really discussed, “uses glycosylation, which adds a sugar molecule to a cannabinoid molecule to make it water-soluble.” The article doesn’t mention which of Trait’s competitors are using this potentially dangerous method. Trait’s PR is handled by New York-based Peaks Strategies.
The most interesting part might be Eagland not being able to get a call back from Health Canada about whether or not either one of these types of delivery systems is to be regulated.
A rare loss for Skynet…
The Financial Times’ Robin Wigglesworth reports that fund managers have been doing a victory lap after this past month’s downturn in global equities saw human managers outperforming machine-based management for the first time in a long time.
It’s always been the contention of active managers that their true relative value will show up in a bear market… which isn’t a very appealing pitch.
Barron’s Eric Savitz is all over the Fall of Gamestop (NYSE:GME), who is beginning to look like the next Blockbuster as they post declining earnings and run against the trend of the sector’s publishers and console companies. Undaunted, the company went through with a “modified dutch auction tender” June 9th, buying stock back from the philistines who don’t believe in their grand turnaround plan.
Said plan centers around making the retail stores more experiential, selling merch like figurines and t-shirts, hosting tournaments and becoming more of a social center for gaming culture instead of a glass-countered shop where people can go out of their way to buy a physical copy of a game that they might as well just download and play right there on the couch.
The plan a) clearly over-estimates the average gamer’s desire to socialize and b) ignores the terrifying potential that it might work, causing gamers to set up shop at the local Gamestop.
The company must be doing something right. Barron’s reports that GME’s corporate bonds are doing just fine.
Stay tuned for an IPO overview tomorrow, including a cannatech co coming to trade soon that looks pretty good.