Big changes are coming for Sol Global Investments Group
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
Much Remains Unknown
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.