Next Investors logo grey

We are Rolling the Dice on this One…


Published 13-OCT-2020 09:30 A.M.


2 minute read

Long term Creso Pharma (ASX: CPH) shareholders have had a rough ride in the last 12 months.

Following a failed $122M acquisition in June 2019, CPH was forced to seek dilutive funding arrangements to survive. This included convertible notes that damaged the share price to the point where it finds itself today.

Last week the $20M capped CPH raised circa A$9M at $0.0291 per share, finally extinguishing the company’s debt and ridding the company of major con note holders that were hampering any share price appreciation.

While not without risk, we have decided to invest in the CPH placement at 2.91c - roughly its current trading price. We think this could be the low point.

The company’s debts are paid, cash is in the bank, and any stale holders, plus the con note holders, appear to have largely exited over recent days.

In this current hot market, we think there could be upside in CPH in the next couple of months.

Our intent is to see how the company’s strategy plays out.

CPH has substantially trimmed its operating costs, continues to generate revenue from its Canadian growing facilities and it has brought on a high-profile medical cannabis maverick, Bruce Linton as a strategic advisor.

Linton was the founder and CEO of Canopy Growth (TSX: WEED | NYSE: CGC), building that company from a fledgling start up into a US$15BN market cap powerhouse at its peak.

At one stage Canopy was one of the biggest medical cannabis stocks on the planet. We are curious to see what value Linton can bring to CPH holders.

Following our recent investment, we are looking for CPH to deliver significant share price appreciation from here.

However, this is an ASX small cap stock, and there is no guarantee our investment will be successful. Remember at this end of the market, only invest what you can afford to lose.

As we indicated above, the last few days of trading have seen significant volumes in CPH, and we think that now, the con note holders have largely exited the building.

CPH has emerged with a much stronger balance sheet, providing fresh air for any share price catalysts that could come.

Read our latest analysis on Creso Pharma (ASX:CPH)

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.