Namaste Technologies (TSXV: N, N.WT OTCMKTS: NXTTF) investors had a rough day yesterday, with the stock seeing a decline of $0.39, or 16.81%. Aside from a Seeking Alpha article being issued, there seems to be no material reason for the bottom to have fallen out of the company at this particle point in time. Although a down day for the cannabis sector in general with the Canadian Marijuana Index seeing a decrease of 8.25%, Namaste certainly stood out.
That’s not to say that there have been plenty of bearish catalysts for the firm as of late. Certainly, plenty has occurred since our last coverage on the equity. Some of this was covered in the aforementioned Seeking Alpha article. However, some very valid key points were missed in said article that we would like to address. For this briefing however, we’re focused squarely on the Nasdaq listing effort of the management team.
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Namaste’s Desired Nasdaq Uplisting
Initially announced in July, and later reaffirmed on September 11, Namaste has it’s sights firmly set on an uplisting to the Nasdaq stock exchange. The management feels that this action would open the company up to further investment from institutional investors and funds, as well as further international retail investors. Identifying themselves as a technology company, they feel that this exchange best suits their business interests.
The only issue with this however, is that the firm does not meet requirements to list on the exchange. Due to being one of the largest exchanges in the world, the Nasdaq has stringent requirements that must be met. There are several ways in which one can qualify for an uplisting, in addition to there being three Nasdaq markets with which one can be listed. The market desired (Nasdaq Capital Market, Nasdaq Global Market, or Nasdaq Global Select Market) is what determines the severity of the requirements. There are then three options (Earnings, Capitalization with Cash Flow, or Capitalization with Revenue) under which a firm can attempt to qualify.
In any case, there is a minimum price per share requirement of $4.00 USD. The only exception to this, is the Nasdaq Capital Market, wherein a stock must maintain at minimum a $4.00 USD bid price or $3.00 USD closing price for a minimum of 90 days prior to listing. Considering that the equity has been as low as $1.35 ($1.05 USD) as recently as August, the determination of the company to list is a bad sign for investors.
Within the news release on September 11, the company stated “Due to Company developments and a recent increase in its share price, the Company is now closer to meeting the requirements to list on NASDAQ. Based on the Company’s current share price, and the anticipated increase in sales through the launch of its Access to Cannabis for Medical Purposes Regulations (“ACMPR”) sales license, the Company currently intends on reaching the share-price target organically without any share consolidation.” At the time of the release, the company had closed at $3.20 ($2.50 USD) on the day prior, at the tail end of an uptrend.
In order to qualify for Nasdaq listing, at current rates the firm would need to maintain a minimum of $3.84 CAD per share for a period of 90 days. And that’s just for the market with the lowest price per share requirement. For all others, the firm needs to maintain a price of $5.13 CAD.
The other option, of course, is a share consolidation which Namaste did mention in their news release. If the firm wanted to list tomorrow, assuming all other requirements were met, at minimum it would require a 1 for 3 share consolidation. In most instances however, it would require a minimum of a 1 for 4 consolidation, based on current market prices.
Also of note, is that the company mentions it anticipates its price per share to rise accordingly to reflect the sales figures from the licensing of CannMart. Due to the license being received on September 21, 2018, interim financials that reflect this influx of sales revenue will not be filed until roughly January 31, 2019.
It should also be identified that although CannMart has finally received it’s license to sell cannabis, it’s unclear if it has officially opened yet. The website itself lists a total of nine strains available, with varying degrees of completed descriptions. Although the front page boosts five “featured brands”, there is a total of three companies loaded into the shop. Of these, only one, Tetra Bio-Pharma, is featured on the front page. After months of waiting, one would think that the company would have all data preloaded prior to receiving it’s sales licenses, rather than trying to input it after receiving the green light.
Assuming that this is the catalyst that propels the equity above the required ~$3.84 CAD per share price, the firm would not qualify for listing on the Nasdaq until roughly the end of April 2019. Without a share consolidation, that is. Not to mention the variables available in that time frame.
Certainly, monthly figures can be released in the interim to denote the increase in sales, as has been done in the past which may do the trick as well. However, based on the current shares outstanding, Namaste Technologies would require a market cap of $1.05 billion to meet Nasdaq’s listing requirements. This does not factor in the currently open $45 million bought deal, which will add fifteen million additional shares to the mix.
Depending on how determined Dollinger & company is to list on the exchange, a share consolidation may be very likely in the future for current shareholders.
For further Nasdaq listing requirements, visit Venture Law Corp for a full breakdown.
Information for this briefing was found via Sedar, TMX Money, Seeking Alpha, Newswire, Venture Law Corp, CannMart, and Namaste Technologies. The author has no securities or 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.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.