Zenabis Stock Gains Despite Declining Revenue in Q3

Zenabis stock

Zenabis stock is gaining today despite Zenabis Global (TSX:ZENA) (OTCPK:ZBISF) reporting dismal third-quarter results that saw revenue more than halve to $12 million CAD.

Financial Results

Zenabis Global reported cannabis sales of $7.1 million CAD, which is only marginally down from the figure of $7.3 million CAD in the previous quarter. However, sales in the propagation segment fell drastically from $17.4 million CAD to just $4.5 million CAD, with the company blaming growing cycles at its greenhouses, seasonality, and the timing of customers' orders for this sharp drop off. Despite the almost $13 million CAD drop in sales, Zenabis stock is actually up 28% in the US, suggesting some insider movement.

Gross margin for the quarter came in at $5 million CAD for the Vancouver-based pot firm, while expenses were $18.9 million CAD, of which $7.4 million CAD was attributed to salaries and benefits, while administrative expenses were $3.2 million CAD. Elsewhere, cash flow was hampered by the $31 million CAD spent on property and equipment, but the company did generate just over $60 million CAD in financing and so finished the quarter with positive cash flow. Zenabis shares are currently trading for $0.17 in Toronto.

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Following the receipt of new licenses and licensing amendments for Zenabis Global's Langley and Atholville sites, Zenabis managed to more-than-double its cultivation haul from the previous quarter to 5,200 kg of dried cannabis, surpassing the company's expectations by around 25%. Another boost for Zenabis stock came from the net loss figure of $5.8 million CAD, which is a substantial decrease from the previous quarter’s $18.4 million loss, representing an estimated loss per share of around $0.03 compared to $0.09 in Q2.

Zenabis Stock Gains Due to Insider Trading?

The gains in Zenabis stock today could be attributed to a knock-on effect from the company's former CEO and current CFO dumping a 37% stake in the company in October ahead of an ex-rights offering. Zenabis Global announced the offering on October 24, and it will allow shareholders to receive one right per common share, in order to raise $20.8 million USD as the company struggles for capital due to Health Canada’s lack of action against the black market.

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