CannBusiness Group, Inc. (OTCMKTS:CBGI) Scaled Downward Despite Earnings Announcement
One thing is certain: times are exciting for MMJ stocks, and the excitement around CannBusiness Group, Inc. (OTCMKTS:CBGI) is all about the tipping of the scales. Last week, CBGI started to unravel its high achievements, sliding down by a total of 50% despite the strong start of the period. 
CBGI slid another 23% on Friday, reaching $0.205, on selling volumes above $3.3 million. Unfortunately, the announcement of financial results did more in the days of expectation than on the day of the actual posting of the numbers. The filings for 2013 reveal:
- $950,000 annual revenues
- $816,000 net loss
- $17,000 cash at the end of the period
- $3 million current liabilities
Unfortunately, we still have not seen the audited financials on the SEC page, and for CBGI, the pink sheet landing page of its OTC profile is the only source of the data. What is even more worrying is that in 2013, the company mostly burned cash, with a net cash loss of $68,000, compared to a net cash gain for 2012 of $10,000. While the company is ambitious about new projects, we still have to wait for more solid signs of activity.
The latest CBGI news are both encouraging and somehow pessimistic, underlining the company’s need for external financing until more success is achieved with its cannabis business model. CBGI plans a private placement of $5 million worth of shares, and created an outreach landing page for investors interested in the offer.
Investors’ forums see CBGI as yet another powerhouse stock, which can easily vault the 50-cent positions again. With more laws expected for other US states, this may prove a consistent boost to stock prices in this sector. Still, in the shorter term, CBGI has shown it could sink back with lack of enough news.
Friday was a day when the Marijuana index as a whole managed to grow by a faction of a percent, yet most of the separate companies were in the red. The biggest loser was Mentor Capital, Inc. (OTCMKTS:MNTR), shedding more than 20% to $3.70.
The winners were among the underpriced tickers recently moving in from sub-penny categories, such as Tranzbyte, Corp. (OTCMKTS:ERBB), which added a further 24% to $0.07. The exposure to the index gave these companies a constant inflow of attention, although the price remains on the low side.
For CBGI, the encouraging issue is that the new shares would be sold under a restrictive Rule 506, meaning the holdings could not be sold for a year. Still, those securities do not need to be registered, so the company will fly under the threat of a vast amount of shares waiting to be dumped at the right moment. If you still like the bargain that CBGI has become, keep in mind that any price level could sink further down, and avoid over-investing in a hype-fueled sector.
