Why The Green Organic Dutchman’s (TSX:TGOD) Stock Price Fell 40% in September

September has been a tough month for The Green Organic Dutchman (TSX:TGOD), as the stock nearly lost half its value. Let’s look at what might have caused this sharp drop in price.

Aurora quit its partnership with TGOD

TGOD suffered a major setback at the beginning of September when its long-time cornerstone investor Aurora Cannabis sold its remaining 10.5% position in the company through a block trade at $3 per share for total proceeds of $86.5 million. The sale was made at a 14.5% discount to TGOD’s closing price of $3.51.

In January 2018, Aurora took a 17% stake in TGOD, with the option to eventually increase its position to more than 50%. The stake was bought at a pre-IPO price of $1.65 per share. The investment also gave Aurora the right to acquire up to 20% of TGOD’s annual organic cannabis production.

Over the next 18 months, Aurora didn’t exercise its options. On the contrary, since late 2018, Aurora has been slowly selling off its stake in TGOD. In January, Aurora bought Whistler Medical for $175 million, eliminating the need to buy organic cannabis from TGOD.

In September, Aurora completely left the partnership. After TGOD lost its main long-term partner and potential buyer, a huge sell-off of its shares followed, bringing down the small pot company shares.

What looks like a setback could actually become an opportunity for TGOD’s to grow faster. The company used to sell its premium cannabis to Aurora at wholesale prices, but it will now be able to sell the same product at market prices to other customers.

Good news didn’t affect the stock price

There has been some good news for TGOD in September, but unfortunately, that didn’t have a positive impact on the stock, as the share price continued to fall throughout the month.

The first good news was released on September 3, when TGOD announced that it has received approval from Health Canada to start cultivation operations at its Hamilton hybrid greenhouse. The 123,000-square-foot state-of-the-art facility will serve to increase TGOD’s premium organic cannabis production as sales increase in Canada.

Then, on September 12, TGOD announced that following its launch in Ontario at the end of August, which was its first entry into the Canadian recreational market, the initial demand for premium organic cannabis has exceeded expectations. TGOD’s high-THC signature strain, Unite Organic, is performing well online and at dispensaries, triggering a second OCS’s order earlier than expected.

The premium certified organic cannabis producer has received positive feedback from retailers and consumers across Ontario. The price premium is not an obstacle for cannabis users looking for a high-quality flower.

What to expect in the coming months

There is a long way to go before TGOD becomes profitable, but the small pot company is on the right track.

TGOD’s team is working tirelessly to increase the production of its premium organic products as it prepares to expand distribution with additional strains and product forms, as well as to other provinces in the coming months. With the completion of its hybrid greenhouse in Hamilton, and a second one almost completed in Valleyfield, TGOD is on track to distribute its products nationally early next year.

As a survey by Hill & Knowlton pointed out earlier this year, over 50% of recreational consumers intending to buy cannabis said it is important that their cannabis be organic.

It looks like TGOD has a lot of potential, but expect to still see a lot of volatility in the coming months. I would wait for things to become more stable before investing in a small pot company like TGOD.

One tiny small-cap stock to bet on ahead of Cannabis 2.0 on October 17th…

The first wave of cannabis legalization minted millionaires out of everyday investors, and it might be about to happen again.

Because when edibles are legalized in Canada on October 17th, experts project a new $2.7 BILLION market will be born.

Our last legalization stock pick is already up 1,211%, and now we’re recommending one tiny small-cap stock before Cannabis 2.0.

This could be our next +1,000% winner in the cannabis space.

Hurry, the second wave of cannabis legalization is about to hit and this stock could skyrocket.

Click here to learn more!

More reading

Fool contributor Stephanie Bedard-Chateauneuf owns shares of Aurora Cannabis.

Source: The Fool
Why The Green Organic Dutchman’s (TSX:TGOD) Stock Price Fell 40% in September
The Fool

The Motley Fool
Contributor for investorsnews.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts