Charlotte’s Web stock (CSE:CWEB)(OTCQX:CBWHF) plummeted 22% last week after the company made shareholders aware of a secondary stock offering.
What also didn’t help shares was that, in the same week, the trade war between America and China racked the global equity markets. This was then reflected across the entire cannabis sector which tumbled.
SeekingAlpha gives more detail:
“Major cannabis ETFs dropped 3% last week while the U.S.-focused index dropped 5.1%.”
Now, Charlotte’s Web stock is selling for $14.84 USD, significantly lower from the highs of $19.66 USD—reached only days prior to the secondary offering announcement.
However, is the bedlam offering new investors a good opportunity to buy?
Charlotte’s Web Stock – On A Low Ebb
The company announced that “selling shareholders were unloading 7 million shares at a price of $20.00 CAD ($15 USD approx).”
At this pricing, the deal is only slightly higher than current share prices but nearly $10 USD below recent highs of $25 USD.
But this could spell the opportune time for new investors to buy.
Yahoo Finance says the following:
“The selling shareholders have another 15% allotted to the deal that will in total raise $161 million CAD for early investors. The diluted share count is around 106 million. The stock now has a market valuation down at $1.5 billion so the deal amounts to nearly 10% of the outstanding shares. The amount is very sizable, but the shareholders are now less of a risk to unload more shares with the hemp-derived CBD market set to soar in the next 5 years”.
Charlotte’s Web Stock – Q1 Preliminary Report
The company didn’t choose the best time to unload significant shares. It has recently released a preliminary Q1 report that suggested a lack of quarterly growth.
The company forecasted “revenues of $21 to $22 million with adjusted EBITDA of $4.0 to $4.5 million on gross margins of up to 75%”.
With these numbers similar to Charlotte’s Q4 revenues, investors could be troubled.
March sales hit a record $8 million and the company now has over 6,000 retail stores stocking its product. As such, the company has made significant operational growth this year alone. And further, Charlotte’s Web is doubling the planting of hemp acres in 2019 to 300 acres.
Revenue numbers are likely to reflect this later in 2019 and into 2020.
Importantly, Charlotte’s Web stock is already a sought-after name in the nascent US hemp-derived CBD industry. As such, it is primed to take full advantage of this purported “$22 billion industry by 2022” (according to Brightfield Group).
Already a market leader, Charlotte is way ahead of the competition—many of which are still only entering.
Yahoo Finance is saying that “new investors get a better deal with the stock down to $15”, so it looks to be a promising time to utilize the price dip.
The secondary share offering is a pain, sure. But the company remains a market leader in massive US CBD sector and still has “an appealing $1.5 billion valuation after the dip”.
What are your thoughts on this? Are you a Charlotte’s Web stock investor?
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