SOL Global Split Leaves Shareholders Waiting for Clarity

Big changes are coming for Sol Global Investments Group . The business will separate into three separate companies. With the stock recently facing a decline, it remains unclear what the future holds for the new companies. However, the separation could create new investment opportunities that did not materialize under the previous construct.

SOL Global Separating Into Three Parts

What is one will soon become three. The U.S., multi-state cannabis business will separate into a new company called Bluma Wellness. Most non-investment assets will fall under the control of Bluma Wellness. Bluma will operate as an independent company, with SOL Global CEO Brady Cobb at the helm.

Andy DeFrancesco will step down as Chairman and Chief Investment Officer. Instead, he will lead the other company forming from the deal, SOL Investment Group, or “SIG.” Analysts expect this deal by the end of October 2019. Former Kellogg’s President Paul Norman will retain control of HeavenlyRx, which will also separate from both entities.

Much Remains Unknown

Their most recent earnings report wasn’t received well by the market with the company admitting asset values had fallen along with other marijuana stocks.

At this time we’re uncertain how this will affect stockholders, with the re-arrangement making the new SOL Investment Group a private company. Their most recent earnings report wasn’t received well by the market with the company admitting asset values had fallen along with other marijuana stocks. Hopefully, this change in structure provides them with greater flexibility.

In the report, SOL Global reported a C$43.5 million ($33.04 million) loss or 81 Canadian cents (62 cents) per share. This came in well above the C$2.9 million ($2.2 million) loss in the previous year.

However, C$33.5 million ($25.44 million) came from the reduced value of assets. Another C$6.8 million ($5.16 million) came from non-cash expenses. All of this stands in stark contrast from the previous quarter when profits came in at C$110.7 million ($84.08 million). Investment gains drove the profit for that quarter.

Investors Should Watch Closely

In short, the volatility of marijuana equities gave SOL stock significant profits one quarter and massive losses the next. Given that volatility, I think the separation will benefit all three new entities. However, many multi-state operators have suffered from a stock standpoint. The Schedule I designation has hampered growth, although investors may buy into such stocks as restrictions loosen.

More importantly, at least in the short term, this leaves investors without a clear idea of what company they own, especially on the financial side. Until the new entities release their first financial statements to the public, they have little idea of the state of Bluma Wellness or HeavenlyRx.

Moreover, marijuana stocks generally, have continued to fall. However, if Bluma or HeavenlyRx can stand tall on their own, the recent decline could provide a buying opportunity once clarity on the companies has been provided.

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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