Many cannabis companies are reporting their quarterly results in November.
And while it is excluded from adjusted earnings before interest, taxes, depreciation, and amortization calculations, that doesn’t mean investors should ignore it.
An example of this is when inventory values may need to be written down because products have been sitting too long, and the business no longer believes it can sell them for what it previously did.
And the more warrants a company has out there, the more potential there is for a flood of shares to hit the market as the stock rises in value.
The exercise price is key because if someone is holding a warrant and the price of a stock surges above that value, then the warrant is in the money, and there’s an incentive to use it to buy shares of the stock .
That’s why an easy rule here is that if it’s too complex and difficult to do so, it’s probably best to steer clear of the stock, as it could be nothing more than a dilution machine.
Although Sundial Growers’ stock is up 177% over the past year, that was largely driven by the meme stock craze at the start of the year.
You might see “price compression” mentioned on an earnings report, which is a nicer way of saying that the company has reduced its prices.
That doesn’t leave much of a chance for the company to get out of the red; Canopy Growth recorded an adjusted EBITDA loss of CA$163 million for the quarter, which was nearly double the CA$86 million loss it incurred a year earlier.