Liberty Health Looking to Expand by Contracting

Liberty Health Sciences  is pulling back, but only to stabilize its business. The company sold its non-Florida assets and a property in Florida to increase its cash position. This will probably slow growth for now. However, by strengthening its position within Florida, it could position itself for a move to profitability and more expansion long term.

Asset Sales Bring Cash But Slower Expansion

In a previous article, I argued that Liberty Health would have to find some cash soon to remain a going concern. To accomplish that, it turned to asset sales. The company sold its assets in Ohio and a 36-acre property in Alachua County, Florida. These sales brought in $14.75 million (C$19.5 million)

This cost the company 21,600 sq. ft. of grow space. Also, the Toronto-based company had hoped to expand outside of Florida. That plan will not happen for now.

However, Liberty Health still owns Liberty 360, a 387-acre facility with 190,000 sq. ft. of greenhouse space in Gainesville, Florida. Just as importantly, the C$5.42 million ($4.1 million) cash hoard will grow by nearly C$20 million. Even if the profit picture does not improve, this can keep the company going for over a year. However, organic growth should stem losses. Moreover, the 17th dispensary in Florida, which opened in Panama City on Aug. 30, should help fuel growth.

It has also appeared to stem the decline in LHSIF stock. Liberty Health had experienced steady declines since it traded at over $1 per share around the time that Canada fully legalized marijuana in October. By August, LHSIF had fallen below 30 cents per share.

Is Liberty Health the Hexo of Florida?

Its market share in Florida can bolster Liberty Health in much the same way Quebec supports Hexo. By having a strong home base, Liberty Health can try again to venture outside of Florida.

Liberty Health now trades at just above 31 cents per share. Admittedly, the penny-stock status and $108 million market cap make it best suited for a speculative position. However, it remains the 2nd largest seller of smokable cannabis in Florida. This helps increase recognition of their Liberty and Papa’s Herb brands across the Sunshine State.

Moreover, the focus on Florida reminds me of one of the more prominent Canadian marijuana stocks, Hexo . Hexo claims a 30% market share in Quebec, home to around 21% of Canada’s population. This gives the company an approximate 6% market share in Canada. It also provides Hexo with a stable home base which it can use to expand outside of Quebec.

Florida is America’s 3rd largest state in terms of population. It may not have 21% of the country’s population, but its population now exceeds 21 million people. Its market share in Florida can bolster Liberty Health in much the same way Quebec supports Hexo. By having a strong home base, Liberty Health can try again to venture outside of Florida. As a wave of legalization sweeps the U.S., the market conditions could also become more suitable for such a move.

At 31 cents per share, the market has seemingly written off LHSIF stock. However, if it can turn profitable, it could become a top marijuana company by following the strategy of a Canadian counterpart.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

 

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Will Healy
Will Healy is a freelance business and financial writer based in the Dallas area. In addition to marijuana, energy, and mining stocks, he has also written about real estate, insurance, personal finance, and macroeconomics.In addition to Capital 10X, his articles have appeared on sites such as InvestorPlace, Yahoo! Finance, MSN Money, Kiplinger’s Personal Finance, GOBankingRates, and Seeking Alpha.Will holds a B.S. in Journalism from Texas A&M University, an M.S. in Geography from the University of North Texas, and an MBA from the University of Texas at Dallas.Phone: 416-721-8257. Address: 682 Indian Road Toronto, Ontario M6P 2C9.

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