Shares of Cellular Goods PLC (LON: CBX) are down 75.2% from their IPO highs amid a broader selloff in cannabis stocks after the industry went out of favour among investors currently focus on reopening stocks.
The company has attracted criticism from various quarters for reporting a loss of £2.1m ($3m) for the six months ended February 2021 compared to the £140,000 loss recorded during a similar period last year.
Cellular Goods attributed the massive loss to the IPO process as it listed on the London Stock Exchange and to one-off payments to crucial employees in the form of share allocations. The company is also preparing to launch its first consumer products, a capital-intensive process.
Many investors wonder whether Cellular Goods will recover and rally back to its IPO highs any time soon, and the answer is that nobody can know that for sure. Anybody who says they can is simply guessing.
However, looking at the company’s operations, we can see that it is yet to generate revenues, a crucial aspect of a firm’s long-term survival. No firm can stay in business for long if they are not generating any revenues.
The first major hurdle for Cellular Goods is to launch their first products, which will not contain THC, the psychoactive compound found in cannabis that makes people high. We then have to gauge consumer’s reaction to the products. Will they be a hit or a miss?
Only time will tell whether consumers will embrace the self-care products that are likely targeted at the beauty sector instead of the recreational or medical industry like most cannabis companies.
Investors should bear in mind that the self-care industry is fragmented and has significant global companies and other smaller players competing against Cellular Goods.
I am staying away from Cellular Goods shares until they launch their first products to gauge consumer demand.
*This is not investment advice.
Cellular Goods share price.
Cellular Goods shares are down 75.18% from their IPO highs of 29.02p to their current trading price of 7.20p.