Flooding the market with shares priced below market value proved to be a bad move for Green Thumb
Green Thumb Industries Inc CNSX: GTII saw its stock climb in September after news broke that the company picked up a billionaire investor. By the middle of October, most of those gains had been erased. In a period of one month, the stock fell 35 percent. Here is a look at why it tumbled back.
According to analysts, the current slump is the result of frequent equity issuance and overvaluation compared to other United States marijuana stocks. Still, many investors continue to view Green Thumb as a top pick for exposure in the U.S. cannabis sector.
So how is it that a marijuana stock can be on the rise today and falling tomorrow? Shares of Green Thumb reached $32.50 at one point. However, during that time it added more than 12 million shares and listed on two capital markets.
The company had a good summer after an $80.3 million deal went through. Green Thumb used the proceeds to purchase one of the 10 available medical marijuana licenses in New York. It also built out its five stores in Ohio. Things kept getting better when high-profile billionaire investor Leon Cooperman bought stock in the company.
The tipping point was when Green Thumb decided to capitalize on their rising share price and issued another 4.4 million shares for $20 per share. The move was seen as opportunistic. The company also failed to announce a specific use for the proceeds of the second equity offering – something that came up as a red flag for potential investors.