At time of writing, the share price of Elixinol Global Limited [ASX:EXL] is down 3.7%, trading at 65 cents.
From the lofty double top of April and May, the Elixinol share price has continued to slide down some 79% in a 12 month window:
After going to almost $6 a share, it is going for almost a tenth of this price today. We look at what has happened to the Elixinol share price and the company’s restructure.
Thought #1: Elixinol share price reflects boom bust hype cycle of ASX cannabis stocks
Elixinol isn’t alone in its difficulties, the share prices of many other ASX cannabis stocks are suffering at the moment.
Many of the investors that bought larger-cap ASX cannabis stocks (at their early 2018 peaks) such as Auscann Group Holdings Ltd [ASX:AC8] and Cann Group Limited [ASX:CAN] could have shifted their attention to EXL after these two started going down in the charts.
This is the boom bust hype cycle that surrounds some of these stocks.
Some promising numbers emerge, revenue keeps going up and investors pile in.
Since then the Elixinol share price slide continued.
It then got a brief bounce in November of last year on a US regulatory development.
But where does the Elixinol share price go from here?
Thought #2: Elixinol restructure points to problems that may take a long time to fix
The big headline from Elixinol’s most recent quarterly was that normalised revenue was down 44% on the last quarter.
This is a sharp drop and the quarterly noted that the company was simplifying their business model to focus on hemp derived CBD.
The goal is to reduce future cash burn.
The numbers in the quarterly prompted a ‘please explain’ from the ASX, which noted the negative operating cash flows of $10.8 million and cash of $20.3 million.
With estimated cash outflows of $13.2 million for the next quarter, you could see why the ASX might be concerned about Elixinol’s ability to sustain its business.
In responding to the ASX’s query the company noted that it had sold of its Elixinol Japan business, its Hemp Foods Australia business as well as the $2.6 million it expects from the sale of its Nunyara land.
Nunyara was the planned entry to the Australian medicinal market.
Elixinol said it was confident it could raise further money via equity or debt if required.
All up, the turnaround may take some time to flow through to results, we suspect.
And the company’s prior success was what led it to be included in our Top 3 Pot Stocks report.
We’ve since updated the report to reflect picks with potential in the current ASX cannabis market downturn.
You can get that report here.
One has sizeable revenues already, the second specializes in the Aussie market and the third one has proven that it can beat the biggest cannabis ETF before. If money starts to flow back into the cannabis market, it could potentially provide a better return. With three unique plays, the free report is well worth a read.
For Money Morning
PS: Read our latest coverage on the Elixinol Share Price here.