Medical Marijuana, Inc. (OTCMKTS:MJNA) Posts Letter to Shareholders, Recovers

Yesterday morning Medical Marijuana, Inc. (OTCMKTS:MJNA) published a letter that was meant to address the increasing panic among its stockholders in the wake of Monday’s 28% drop that dragged share price down to $0.12. Largely due to the letter, MJNA rallied and climbed sharply in early trading to close the day 51% up.

The lengthy letter addressed step-by-step virtually all of the concerns that may have arisen in MJNA shareholders, fueled both by events related to the company and its management, as well as a certain article outlet that posted a series of accusatory pieces on the company. Traders were obviously satisfied with the contents of the letter and MJNA shuffled another 20 million shares while climbing back near $0.20 per share.

Whoever was planning to short MJNA had a field day on Monday as it was almost certain the stock would drop in the wake of the borderline slanderous articles. The huge price volatility over the last sessions provided plenty of opportunities for greedy traders to do as they please.

The issue still present even after the clarifications provided in the letter is the PhytoSphere transaction executed between MJNA and CannaVest Corp. (OTCBB:CANV). According to the letter MJNA has so far received $10.5 million of the $35 million transaction, but so far payment has been in stock. It should be assumed that the share price is still latched between $4.50 and $6.00, which is still better than CANV‘s current price of $20.00.

The letter presents two scenarios – CANV executing the remainder of the payment in cash or in stock once again. CANV‘s 10-K that arrived in mid-April showed that the company was still cashless, so it appears cash payments are out of the question. The stock payment scenario would lead to MJNA becoming the majority shareholder in CANV. The letter stipulates that this would lead to ‘cost savings in production’ for MJNA and to an ‘increase in value it may get from the continued growth of the brand’.

Considering CANV is currently an OTC company whose shares cost $20 apiece that has $431 in cash and never generated revenues in the past and had 5 employees as of mid-April, those statements may be a bit of an exaggeration.

All eyes are now turned to MJNA‘s upcoming report for Q1. This would hopefully contain detailed and sufficient information that can restore the confidence of shareholders that was shaken during the stock’s price decline back into the -teens and the cannonade of articles aimed at inciting scandal.