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JSE Cannabis Companies Hit Hard Times As the Dagga Dollar Remains Elusive

The two main cannabis plays on the JSE, Nutritional Holdings and Labat, are in trouble. The Johannesburg Stock Exchange (JSE) has suspended trading in Nutrihold shares and has warned Labat that it has until the end of the month to produce its latest financials or risk losing its listing.

Reuters reports that Nutrihold CEO Mohammad Tariq Azum has stepped down because of Covid-19 related health issues and has appointed Nikhyle Dasarath as incoming CEO with effect from 8 June 2021.

 

In the FMonline on 24 June 2021, Marc Hassenfus lists Nutrihold as a penny stock to avoid.

“But for those determined to venture into penny stocks, there are some basic rules. First, avoid companies with “hard luck stories” or fanciful plans. In other words, be wary of executives who make the same excuses about poor performance year after

Do not get taken in by executives promising a new strategic tack that will change the company’s fortunes.

Nutritional Holdings, a specialist food company, made a sudden shift into the cannabis sector — accompanied by plans to launch a cryptocurrency that might best be described as an exercise in sock-smoking. The share has been suspended on the JSE.

It’s probably best to avoid companies that need to cull debt.

Inevitably, a rescue party will inject fresh cash via an issue of shares — a lot of them — at a heavily discounted price, which dilutes the little value left for existing shareholders.

 

One key consideration is corporate governance. Is the board hosting AGMs on time and in an orderly fashion? And, more important, are the executives delivering financial results within the JSE’s deadlines? Tardiness in this regard is a red flag.

And check the financials carefully for the auditor’s opinion, which might be the best reality check for any optimistic spoutings from the chair and the CEO in the annual report”.

Hassensfus’s analysis applies to Labat who’s traded shares for equity in a number of operations valuing its shares at R1.00 each. As of 24 June 2021 Labsat shares were trading below 50c, thus halving the value of the group’s subsidiaries and the underlying wealth of those who sold Labat stakes in their ventures.  

Nonetheless, Labat appears better positioned than Nutrihold to ride out the torrid times ahead. Both are relying heavily on their Lesotho grow operations to generate revenue fast. 

Labat’s immediate challenge, however is to produce the last six months financials for the year ending February 2021. It has five more days to do so or risk losing its listing, according to the JSE.

 

See All Labat Coverage Here

See All Nutrihold Coverage Here

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