Auxly Stock Hovers Around 52-Week Low: Should You Panic?

Auxly stock

2019 was not a great year for the cannabis industry, and most of the companies in the sector struggled to various extents. Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF) was no exception in this regard, but it should be noted that Auxly stock did not do as badly as some of its peers.

Auxly is not among the biggest companies in the sector and has a relatively modest market cap of only $261 million USD. In 2019, the stock declined by 36%, and while that is better than many other stocks, this decline still took Auxly stock to its 52-week low of $0.3970 a share on the OTC market.

Increased Quarterly Losses

The company’s business has had its fair share of troubles, having lost as much as $80 million CAD in the previous four quarters. In the same period, its sales stood at only $5 million CAD. That being said, 2020 could prove to be better for Auxly Cannabis Group, primarily due to the legalization of cannabis derivative products in Canada.

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In addition to that, the presence of tobacco major Imperial Brands (OTCQX:IMBBF) as one of its main investors will also give Auxly access to the former’s vaping technology. In the short-term, however, this might not be a telling advantage due to the widespread health concerns surrounding vaping.

At the time of writing, Auxly stock is up 0.70% at $0.43 USD.

Investment by Imperial Brands

However, it is quite clear that the investment by Imperial Brands is going to be one of the bigger factors behind Auxly Cannabis Group’s fortunes. In December, Imperial Brands topped up its investment in the company, owing to the nature of the agreement between the two parties.

Imperial is entitled to top up its position if its equity position gets diluted. Hence, in December, the company invested another $5.2 million in Auxly. This is part of the original $123 million investment deal that was reached in July last year. The fresh investment is a major positive for Auxly stock.

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