TILT stock is the most active cannabis stock so far in May as TILT Holdings (CSE:TILT) (OTCQB:SVVTF) has released multiple press releases over the past couple of weeks.
The cannabis industry in the United States and Canada might be growing at a breakneck pace, but Tilt is perhaps not one of those companies and considering the rate at which its stock is tanking it is clear to see why. Considering the fact that it is a vertically integrated company in the cannabis industry and also offers a range of services to companies in the same industry, it is a company that appears to have an attractive business model.
The company’s business is entirely focused on the US cannabis market and back in December last year, it engineered a reverse takeover to raise $120 million. However, the company stock has failed to take off and is trading below the IPO price.
Problems With Tilt Stock
One of the first things to point out about Tilt stock is that the company is highly dependent on acquisitions to continue to run its vertically integrated business and that has put a huge amount of pressure on it. However, if anyone went a bit deeper into the company’s filing with the Canadian security regulatory authority back in December last year, the problems with the company’s finances would have become far more apparent.
In that filing, Tilt published its balance sheet from June 2018 and the information there was startling. The company stated that it had assets of $905 million but out of that intangible assets and goodwill totaled a staggering $721 million. If a company has such a valuation and around 80% of the value is locked in those items, then it is a stock that should send alarm bells ringing.
Last week, the TILT stock nosedived by as much as 40% with comparison to its price on 2nd May, but after appointing a new CEO, it recovered by 22% on Friday.
Half a Billion Write-Down
However, the really bad news for the company was released on 1st May, when it revealed its fourth fiscal quarter and financial results for 2018. In an astonishing development, the company chose to write down a sum of $496.4 million and soon the company’s stock went into a freefall.
The losses for the year stood at an astonishing $552.1 million and that becomes even more of a shock when one considers the fact that the company is currently valued at only $200 million. The company has failed to value its business properly and soon enough it had to change its CEO in order to calm the markets. It seems that move has worked somewhat but it remains to be seen whether the business can be turned around.
TILT stock is down another 5% and trading at $1.51 in the early morning session on Monday on OTC market.
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