Despite the cannabis sector becoming well known for the incineration of capital, sometimes its simply impressive how firms are able to make perceived value vanish. The latest firm to do so is that of Bhang Inc (CSE: BHNG), whom this morning announced that it has divested of Red Ace, LLC for the paltry sum of US$5,000, along with the assumption of undisclosed liabilities.
While selling its indirect 100% interest in what was described previously as a “leading wellness beverage company,” the reality is that Bhang was never able to make much of the CBD infused beverage maker, as evidenced by the selling price. The company acquired the firm just over a year ago – the purchase was announced on September 9, 2019. In that time, it managed to turn the effective C$2.6 million valuation of the firm into a rounding error.
The company was acquired via the issuance of 4,513.943 multiple voting shares, valued at $570 per share. It appears that the transaction went so poorly, that Bhang and the selling shareholders of the firm actually entered into a settlement agreement, whereby 2,379.122 multiple voting shares would be returned to Bhang. While this effectively changes the acquisition price of Red Ace to $1.2 million, it does nothing to improve the sale price of the firm.
The bright side, is that the company had effectively written off the entire value of the Red Ace assets previously. Goodwill of US$1.6 million had been attributed to the purchase, which had been written off in the quarter following acquisition as a result of changes to federal law in regards to hemp-based CBD. It’s unclear the value of liabilities of the firm, however at least US$150,000 was removed from Bhang’s balance sheet based on August quarterly filings.
The sale of the assets was described by the company as, “an effort for Bhang to re-focus resources on its core business of cannabis-infused gourmet chocolate products.”
Bhang Inc last traded at $0.075 on the CSE.
Information for this briefing was found via the Canadian Securities Exchange and Bhang Inc. The author has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
