Investors in TGOD stock have had a bumpy ride over the last few weeks. Gaining as much as 20% in the middle of the month following news that The Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) had secured financing to complete the construction of its flagship Ancaster facility, shares then retreated in the latter half of the month to now trade just 3 cents above an all-time low.
Aggressive Expansion Comes Back to Bite TGOD Stock
Like many of its compatriots, TGOD undertook an aggressive expansion strategy in the early days of the cannabis market in an effort to gain an edge on its competitors, aiming to bring total production capacity to 219,000 kilograms by the end of this year. With cannabis sales failing to reach the anticipated heights as a result of a lack of retail visibility and regulatory hurdles, the cash quickly began to dry up for the Ontario-based pot producer, leading to some alarming losses in TGOD stock.
Failed Facility Sale
The Financial Post reported in October that The Green Organic Dutchman had put its Ancaster site on the market for around C$95 million despite construction not yet being finished and TGOD having invested C$107 million into the project. Initially struggling to attract any interest in the facility, TGOD eventually secured a leaseback agreement on the property in which it netted C$23 million in funding to complete construction, along with a condition stating it can purchase the site for $1.00 upon expiry of the ten-year term. However, TGOD stock has still dropped over 40% since.
Then, in December, The Green Organic Dutchman's financial position took another turn. On December 13, the company said it was walking away from that financing after reaching a financing agreement on more favorable terms elsewhere. Maynbridge Capital Inc agreed to lend TGOD C$41.7 million in a senior secured debt credit facility, with C$26.7 million in the form of a term loan with a maturity of 18 months. The first twelve months will see interest-only payments, while the final six months of the loan will see principal and interest payments
This messy financial situation has weighed on the minds of investors who saw the uncertainty regarding the cash-strapped pot firm as overly volatile. TGOD stock currently trades for just $0.67, having been valued at over $5.50 less than a year ago.
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