Cannabis Science, Inc. (OTCMKTS:CBIS) Surges On Sector Hype
Yesterday the marijuana sector exploded once more. Almost all of the marijuana pennystocks registered impressive gains ahead of today’s elections when 3 states and the DC will vote on less restrictive marijuana laws. The stock of Cannabis Science, Inc. (OTCMKTS:CBIS) was already running up the chart and the rekindled enthusiasm shown by investors only further accelerated its climb.
CBIS closed yesterday’s session with a gain of 12.5% at $0.0943, just short of the intraday high of $0.095. The last time the company traded at such prices was way back in mid-July. Even more impressive was the sheer number of shares that changed hands during the trading hours. Investors shifted nearly 20 million shares surpassing the average volume by over 6 times. The dollar value for the day reached $1.8 million.
There is one problem though – how long will CBIS manage to keep its current gains? At the start of the year, again pushed by marijuana hype, the company almost touched on 30 cents per share but since then its chart performance has been quite depressing. Just a couple of weeks ago the ticker slumped down to a low of less than 5 cents per share. Left to move on its own the stock rarely manages to retain investors’ trust.
Despite attempting to develop drugs containing cannabis and marijuana extracts for years the company is nowhere near having a completed product. The latest PR announced that they are still investigating promising strains for pre-clinical drug development programs. In the meantime their fundamentals are not enough to inspire confidence – at the end of June CBIS had:
• $791 thousand cash
• $1.1 million total current assets
• $4.2 million total current liabilities
• ZERO revenues
• $1.5 million net loss
Another huge red flag that we warned you about is the continued dilution of the common stock of CBIS. Earlier this year the company reached its limit with 846 million outstanding shares out of the 850 million authorized. So what did they decide to do? – Well, to increase the A/S to 1.5 billion of course. By November 15 CBIS should file their next quarterly report and it will show how many outstanding shares there are at the moment.
The poor results, however, have not stopped the management team from receiving millions upon millions of shares as stock compensation. Under the 2012 Equity Compensation Plan 48 million shares have been issued so far. In April, this year, a S-8 registration statement for 6.5 million shares under the 2014 Stock Compensation Plan was filed. Apparently those shares were insufficient and on October 10 another S-8 statement was filed. This time 50 million shares were registered under the 2014 Stock Compensation Plan B.
As we said earlier CBIS has been making a recovery recently and insiders of the company have taken the opportunity to shed some of their shares. The latest form 4 was submitted just 3 days ago and it showed that Chad S. Johnson, COO of the company, sold a total of 750 thousand shares during the October 30 and October 31 sessions.
The risks around the stock are significant and any trades should be attempted only after doing extensive due diligence. Still, the current industry hype could provide opportunities for some quick gains if you plan your investment right. If you miss the timing though the losses could be devastating.
