Zenabis stock is trading near an all-time low as Zenabis Global (TSX:ZENA) (OTCPK:ZBISF) continues to contend with pushback over its proposed rights offering, leaving investors wondering if this pot stock has finally bottomed out.
Tumultuous Year for Zenabis Stock
With the industry suffering a tumultuous year, battling issues of supply and retail visibility, Zenabis Global has tanked more than 90% since January as investors flock from pot stocks. The cash-strapped cannabis producer had announced plans for a rights offering last month, which allowed shareholders to receive one right per common share of Zenabis stock, in order to raise $20.8 million CAD as the company struggles for capital against the vastly undercut prices of the black market.
The offering entitled investors to purchase one common share at $0.15 but will dilute the stock by 66%. These plans did not go down well with investors as Zenabis stock continued to plunge over 70% in the month since the offering was announced. Former CEO and current Chief Facilities Officer, Kevin Coft, sold 37% of his Zenabis holdings just days before the offering.
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Then last week, Zenabis Global reported its third-quarter revenue, which was more bad news for Zenabis stock. Revenue halved to $12 million CAD while sales in the propagation segment fell drastically from $17.4 million CAD to just $4.5 million CAD, with the company blaming growing cycles and the timing of orders for the drop in sales.
Black Market Dominance
However, the real issue facing the company at present is the dominance of the black market, where approximately 70% of Canadian consumers still purchase cannabis from at almost half the price of legitimate retailers. Many companies have urged the authorities to address this issue, to little or no avail as of yet. With Zenabis stock coming under pressure from weak sales, perhaps the company could reduce its price per gram in an attempt to draw customers from illicit vendors.
Until such a point as that happens, or the authorities get a grip on the black market, Zenabis Global looks as though it may be in for more difficulties in the coming months. Zenabis stock is currently trading for just $0.195 in Toronto.
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