Grizzle has viewed a significant segment of the marijuana market as overhyped and at risk of overheating as bubbles do. Now marijuana company Namaste Technologies comes along providing even more fuel to our thesis that irrational euphoria has completely engulfed many of the stocks in the sector.
The Namaste Technologies Pledge
Earlier this week Namaste announced an initiative called “The Pledge”. Any investor who pledges not to sell their Namaste shares within the next 90 days will win themselves an invitation behind the velvet rope to a party thrown by the company at an undisclosed location. The pledge runs from May 14th to May 18th and so far 40% of shares outstanding have been pledged to the cause with more than half attributable to company management and insiders, by our calculations.
Insiders Were Selling Even as the Pledge was Announced
In a twist that you can’t even make up if you tried, the Chairman of the board, Sefi Dollinger, was selling shares on May 14th, at the same time the pledge was being pushed around the internet. We guess he decided not to go to the party.
All Jokes Aside…
At its best, this attempt by management to support the stock price makes them look juvenile and unprofessional and at its worst demonstrates a lack of judgement and ethical behaviour.
The time tested, and well respected way to support the price of a company’s stock is to grow the cashflow of the business. Institutional investors (the ones who can provide long term share support) likely prefer a management team focused on growing and operating the business, not on planning a party to keep investors around for another 90 days.
“The Pledge” is just another example of investors’ complete lack of focus on the fundamentals of the marijuana companies they are buying. Many investors made money during the stock price run-up in early 2018 and are convincing themselves the same thing will happen again in the future. They point to the uncertainty around the future of the marijuana market as a signal of unlimited potential and sky high share prices.
A Final Quote to Explain The State of the Market
When Terry Booth, the CEO of Aurora Cannabis was asked what metrics he used to value MedReleaf before buying them, all he could muster was the following quote that will go down in infamy.