Emerging Markets
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) Major Reversal Brewing as Oil Operator Reports Positive Results From Independent Third Party Mapping of Project Icewine
Published
3 years agoon
By
Boe Rimes88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) trading volume has increased significantly in recent days as positive results from the Icewine East mapping could initiate a major reversal and move northbound on 88 Energy which is significantly oversold since the Merlin 2 plug. On May 9 the Company reported that the 3rd party evaluation of the Icewine East mapping is now complete showing that all Pantheon reservoir units extend onto the Project Icewine acreage. Pantheon wells – Alkaid-1, Talitha-A and Theta West-1 – have flowed 35⁰ to 40⁰ API oil from multiple Brookian reservoirs. Pantheon testing has confirmed reservoir deliverability of light, sweet oil. In-depth petrophysical re-evaluation of Icewine-1 and broader Icewine East acreage has been completed, with the results indicating comparable, or better, reservoir quality in some reservoir units relative to those of Pantheon’s tested intervals which flowed oil. Given the favorable petrophysical comparison between Icewine-1 and Alkaid-1, 88 Energy is optimistic that a production test in the Icewine East acreage could potentially yield a similar or better result than seen during the testing of Alkaid-1. The Company also notes Pantheon’s plans to drill a horizontal production well in mid-2022 in Alkaid, called Alkaid#2.
88 Energy has recently indicated they are in discussions in relation to a potential farm-out of the Project Icewine acreage. Due diligence activities and negotiations are advancing with a third party, including the related work program terms and structure. Execution and completion of the potential transaction is not guaranteed and remains subject to all documentation being agreed and due diligence completed. This has created a special situation for 88 Energy as the stock was way oversold on the Merlin 2 plug; the Company is in a strong financial position, with zero debt, $32 million in the treasury and total oil prospects for their wells targeting at least 1.638 billion barrels of oil in the Permian Basin. Management expects the Company’s financial position will be further strengthened with projected cash flows from recently acquired portfolio of Texas production assets, Project Longhorn.
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88 Energy Ltd (OTCMKTS: EEENF) is an Alaska-focused oil exploration and appraisal company across ~440,000 net acres targeting the world class North Slope of Alaska estimated by the USGS in 2005 to hold more than 50 billion bbl of oil and natural-gas liquids and 227 trillion cubic feet of gas. 88 Energy owns a diversified portfolio of four highly prospective project areas: Project Icewine, Yukon Leases, Project Peregrine and the Umiat oil field. The company is the Operator across all of its portfolio of world class exploration and appraisal assets. 88 Energy’s drilling programs maintain adherence to the strict environmental regulations that exist in the State of Alaska. It’s drilling programs also provide significant job opportunities to local Alaskans. 88 Energy’s purpose is to build a successful exploration and production company that delivers material returns to its shareholders and contributes to stakeholders and development of the regions in which it operates in. 88 Energy has adopted the World Economic Forum Environment, Social, Governance (ESG) reporting framework to report against key sustainability metrics including governance, ethical behavior, carbon emissions, water consumption, diversity and inclusion.
One really exciting aspect of 88 Energy is its newly acquired Project Longhorn in the Permian Basin, Texas which is currently producing in excess of 400 BOE per day gross which represents a 30% increase since the acquisition was completed in February 2022. 88 Energy has a circa 73% average net working interest in these established production assets, which have independently certified net 2P reserves of 2.05 MMBOE.
Project Longhorn – is located in the attractive and proven Permian Basin, and consists of a total landholding exceeding 1,300 net acres. The assets comprise 9 leases with 32 producing wells and associated infrastructure. Lonestar I, LLC retains an approximate 24% net working interest in the assets and, through an affiliate will remain Operator. The remaining working interests are retained by pre-existing joint venture partners.
In March 2022, the Operator of the Longhorn production assets, Lonestar I, LLC, successfully completed the first of a series of capital-efficient work-overs planned after the completion of the Longhorn acquisition. This work-over was completed on time and on budget and has delivered an immediate increase to the total oil and gas production rates of the project.
Project Longhorn has exceptionally low operating costs (lifting costs), which provides high margins from production. First cash receipts from Project Longhorn were received by 88 Energy in March 2022, which comprised a payment of approximately A$0.6 million (net to 88 Energy and net of OPEX/CAPEX). Project Longhorn remains on track to complete the targeted seven capital development activities this year, which is expected to approximately double current production rates by the end of CY2022.
$EEENF #PANR #PTHRF – Geological Maps – 88 Energy Limited Project Icewine – Independent Third-Party Mapping Complete.
"Geological Sweet spots Identified" Fairway Play.
RNS: https://t.co/8eDkIrQgdA pic.twitter.com/GHxqSs6KZX— UFO Pilot (@GeodesRock49) May 9, 2022
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The acquisition of Project Longhorn in Q1 CY2022 represents 88 Energy’s first move into producing oil and gas assets and is in line with the Company’s strategy to build a successful exploration and production company. This initial step has been undertaken in a measured fashion via the purchase of a non-operated working interest with a single basin focus. Project Longhorn contains well understood geology with low technical risk and provides near-term upside via low-cost field development opportunities. As part of the acquisition, 88 Energy has agreed to a low-cost work program for CY2022 that includes seven work-overs. These initiatives are expected to approximately double production rates by the end of CY2022.
On May 9 88 Energy reported the third-party (Jordan & Pay) evaluation of the Shelf Margin Delta (SMD), Slope Fan Set (SFS) and Basin Floor Fan (BFF) play fairways on its Project Icewine acreage is now complete. The independent third-party mapping, which utilised available well information from presentations publicly released by neighbouring acreage holder, Pantheon Resources (AIM:PANR, GBP 975M market capitalisation) (Pantheon), plus internal 88E data, shows that all Pantheon reservoir units extend onto the Project Icewine acreage.
An in-depth petrophysical re-evaluation of Icewine-1 and the broader Icewine East area has also been completed by independent petrophysical consultants (Stimulation Petrophysics Consulting, LLC and Snowfall Energy LLC). The consultants focused on assessing Icewine-1 logs against intervals that flowed oil in Pantheon’s acreage to the north. Pleasingly, a comparison of the tested interval in Alkaid-1 against a similar interval in Icewine-1, called the SMD-B reservoir unit, indicated the favorable potential for a flow test of the same zone in the Icewine acreage.
Pantheon’s wells – Alkaid-1, Talitha-A and Theta West-1 flowed 35 to 40⁰ API oil from multiple Brookian reservoirs. Pantheon’s testing has confirmed reservoir deliverability of light, sweet oil (see Pantheon releases of 7 February and 21 February 2022), which 88 Energy believes is positive for the prospectivity of the adjacent Project Icewine acreage. This data is not yet publicly available and as a result only a qualitative comparison of these logs against Icewine-1 logs could be carried out at this time.
Given the favorable petrophysical comparison between Icewine-1 and Alkaid-1, the Company is optimistic that a production test in the Icewine East acreage could potentially yield a similar or better result than seen during the testing of Alkaid-1. The Company also notes Pantheon’s plans to drill a horizontal production well in mid-2022 in Alkaid, called Alkaid#2, to prove up the development concept (see Pantheon release of 24 January 2022 and Figure 2 available on the Company’s website).
https://twitter.com/GMettyy/status/1523665126527848448
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Penny stock speculators are accumulating 88 Energy and looking forward to a major reversal and move northbound on 88 Energy which is significantly oversold since the Merlin 2 plug. 88 Energy is the operator of over 440,000 net acres in total across the Alaskan regions over four highly prospective project areas: Project Icewine, Yukon Leases and Project Peregrine and the Umiat oil fields. As oil continues to rise quickly recently surpassing $100 per barrel, it’s easy to see why EEENF is getting noticed by investors; the Company has been making some big moves behind the scenes including increasing their ownership in the Peregrine mine to 100%, Extinguishing all of their debt, and beefing up their management team with a new petroleum engineer and a petroleum Geologist in Philip Byrne and Robert Benkovic. The Company is very well funded moving forward with $32 million in the treasury and total oil prospects for their wells targeting at least 1.638 billion barrels of oil in the Permian Basin. Look out for news on Project Longhorn and Icewine East. We will be updating on 88E when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with 88E.
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Disclosure: we hold no position in 88E either long or short and we have not been compensated for this article
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Emerging Markets
Bitfarms (NASDAQ: BITF) in Focus: Exploring the Meteoric 110% Surge and Macro Influences
Published
1 year agoon
December 7, 2023Bitfarms Ltd. (NASDAQ: BITF) rides the wave of explosive growth surging by over 110% from its lows of $1.03 per share in November. This BTC miner has witnessed a 41% increase since last Friday, December 1st, 2023. If you’ve been keeping up with our recent articles, you’ll notice that majority of coverage lacks substantial press releases or filings supporting a surge in valuation. Today’s coverage includes precisely that and more. Let’s delve deeper into BITF to assess if this crypto miner is worth considering amidst the ongoing rise in spot BTC.
Background:
Established in 2017, BITF has established itself as a global leader in Bitcoin (BTC) mining. Utilizing its computational power, the company contributes to various mining pools, earning payment in Bitcoin.
BITF sets itself apart by developing, owning, and operating vertically integrated mining farms. These facilities feature in-house management, company-owned electrical engineering services, installation support, and multiple on-site technical repair centers, ensuring a comprehensive operational setup. Bitfarms relies on its proprietary data analytics system, ensuring superior operational performance and uninterrupted service.
Currently managing 11 farms across four countries—Canada, the United States, Paraguay, and Argentina—Bitfarms predominantly uses environmentally friendly hydro-electric power and maintains long-term power contracts. The company remains dedicated to employing sustainable energy sources, often utilizing locally available and under-utilized energy infrastructure.
In its recent upgrade initiative, BITF has improved its fleet’s efficiency and capital practices ahead of the Halving. This strategic move aims to boost its capital-efficient fleet to 12.0 EH/s by Q2 2024. The focus lies in reducing miner and energy costs, enhancing fleet energy efficiency, and fostering greater pricing flexibility for sustained growth and success.
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Market Update:
At the core of BITF’s latest momentum and strength lies its connection to macro-scale factors. To provide deeper insights into BITF’s future prospects, we’ve conducted a comprehensive market analysis.
The latest market surge propelled spot BTC above the USD $44,000 mark at its peak, reaching its highest value in more than 19 months. This remarkable rally emphasizes the enduring positivity shared among retail and institutional traders alike.
Blackrock ETF:
The primary driving force behind Bitcoin’s ascent appears to be rooted in market expectations of an approved spot BTC exchange-traded fund (ETF) in January 2024. This anticipation has spurred substantial cash inflows from institutional investors, contributing significantly to Bitcoin’s current trajectory.
If the approval unfolds as anticipated, it has the potential to bring a substantial wave of fresh capital into Bitcoin. According to certain projections, this approval might introduce up to $50 billion in new liquidity to Bitcoin. The precise impact on Bitcoin’s price remains uncertain; however, a particular model suggests a 4% price surge for every $1 billion that enters Bitcoin. Consequently, if the projected $50 billion materializes, Bitcoin could potentially double or even triple in value.
Rumours from Qatar:
As per bitcoin enthusiast Max Keiser, Qatar’s sovereign wealth fund (QSWF) (mainly tasked with managing the nation’s extensive oil and gas-derived wealth), is contemplating a significant investment spree of up to $500 billion in the flagship cryptocurrency, Bitcoin.
To offer a comparison, this proposed investment dwarfs the disclosed Bitcoin holdings of MicroStrategy, founded by Michael Saylor, by an astonishing 671 times. Presently, MicroStrategy stands as the largest corporate holder of Bitcoin, possessing 174,530 BTC following its acquisition in November.
Keiser is notably optimistic that QSWF’s monumental investment could propel the price of bitcoin to reach soaring highs of $100,000.
Binance Update:
In the aftermath of former Binance CEO Changpeng Zhao’s guilty plea and the subsequent $4.3 billion settlement with the U.S. Department of Justice (DOJ) on Nov. 21, Bitcoin’s price initially showed mixed signals. Contrary to expectations, Binance did not experience a mass exodus of funds similar to what FTX faced during its public liquidity crisis. Notably, prominent figures in the crypto space, such as Galaxy Digital CEO Mike Novogratz, perceive the settlement as a positive development overall.
At first, Binance’s Bitcoin reserves dropped by 17% from their peak. Following the initial outflows, the balance has shown an increase of nearly 1%. As for FTX, their BTC reserves fell a staggering 99.9% from all-time highs in November 2022 ,with no recovery in sight.
This serves as a significant testament to Bitcoin’s resilience at present, even as the largest cryptocurrency exchange by volume faces a monumental lawsuit. Unlike the substantial impact experienced by FTX, this legal challenge did not severely affect BTC reserves.
So What?:
With multiple factors driving spot BTC, smaller-scale BTC miners are becoming increasingly attractive -especially considering the potential financial growth and rising profit margins. Let’s delve into the recent developments concerning BITF for a closer look.
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What Happened:
On December 1st, 2023, BITF released a comprehensive performance and financial update, revealing robust figures for their BTC mining operations. Based on this report alone, it’s evident that BITF boasts a substantial global operational capacity and possesses the financial support needed to remain competitive, particularly as BTC mining grows more challenging post-halving. To enhance clarity, we’ve restructured the release into bullet points for easier comprehension.
BTC Production: November production recorded 392 BTC, a 1.5% decline from October. The network difficulty surged by 19.0% in November, indicating strong miner demand leading into the 2024 Halving.
Network Metrics: For the eleven months ended November 30th, network difficulty increased by 92.2%, while BTC’s price rose approximately 128.4%. This resulted in a 33.9% improvement in production economics measured by USD/TH/day.
Operating Highlights:
- 6.4 EH/s was online by November 30, 2023, marking a 45% increase from November 30, 2022.
- 66.4 BTC/average EH/s was recorded, down 1.9% from October 2023.
- 13.1 BTC earned daily on average in November, equivalent to about $495,200 per day based on a BTC price of $37,800 on November 30, 2023.
Expansion Initiatives:
- Firm purchase order placed for 35,888 Bitmain T21 miners, with an option for an additional 28,000 T21 miners.
- Finalizing contracts to expand operating capacity from 30 MW to 50 MW at Paso Pe, adding 20 MW of hydro-miner containers.
Financial Update:
- Raised $44 million in gross proceeds through a private placement of common stock and warrants.
- Sold 350 BTC, generating $12.8 million in total proceeds.
- Added 42 BTC to treasury, holding a total of 802 BTC, valued at approximately $30.3 million based on a BTC price of $37,800 at November 30, 2023.
- Held Synthetic HODL™ of 35 long-dated BTC call options as of November 30, 2023.
- Reduced outstanding indebtedness by $1.9 million, leaving a remaining balance of $6.0 million at November 30, 2023.
Technical Analysis:
We’re noticing a trend among retail traders on social platforms like X, discussing technical trading patterns related to crypto miners, specifically highlighting positive momentum linked to an Inverse Head and Shoulders (IHS) pattern. A user, @FreeDoomCapital, suggests that among all miners, BITF seems to exhibit the clearest pattern. Here’s a brief explanation of the pattern to enhance your comprehension.
The Inverse Head and Shoulders (IHS) pattern is a technical analysis formation commonly observed in financial markets, particularly in stocks, currencies, and cryptocurrencies. It’s considered a bullish reversal pattern and typically appears after a downtrend.
Here’s a further breakdown on the pattern:
- Formation: The pattern consists of three successive troughs. The middle trough (the “head”) is the lowest point, while the two surrounding troughs (the “shoulders”) are higher than the head and relatively symmetrical in height.
- Shoulders: The left and right shoulders are formed at the end of a downtrend. They show a decline in price followed by a temporary stabilization or slight increase before declining again.
- Head: The head is formed after the left shoulder, indicating a further decrease in price, often reaching a new low. However, the head is typically higher than the previous trough, indicating a potential shift in the downward momentum.
- Neckline: The neckline is a trendline connecting the highs of the two shoulders. It acts as a critical level; a breakout above this line is a significant signal for a potential trend reversal.
- Volume: Volume analysis can complement the pattern. Generally, during the formation of the left shoulder, the volume decreases, increases during the head formation, and decreases again during the right shoulder formation. A breakout with higher volume after the formation is considered a stronger confirmation of the pattern.
- Confirmation: A confirmed Inverse Head and Shoulders pattern occurs when the price breaks above the neckline. Traders often look for a sustained move above the neckline to confirm the reversal.
The Inverse Head and Shoulders pattern is considered complete when the price breaks above the neckline, indicating a shift from a downtrend to a potential uptrend. Traders and analysts use this pattern as a signal to anticipate higher prices, and they often set price targets based on the distance between the neckline and the head.
Similar to all technical trading patterns, it’s important to recognize that it’s not foolproof and may not be accurate in every instance. However, it’s noteworthy that several sources are paying attention, particularly due to the apparent clarity of BITF’s formation of an IHS pattern in their lineup.
Conclusion:
An essential consideration with BTC miners is the increasing difficulty of mining the digital asset after halving, which is scheduled for around April 2024. BITF’s recent fleet upgrade aims to strengthen its capacity pre-halving, positioning itself as a frontrunner. With spot BTC around USD $44,000, the 392 BTC mined in November alone would translate to approximately USD $17 million in top line revenue. If potential BTC catalysts sky rocket the price to USD $150,000 as some suggest, November’s mining performance would represent nearly $60 million – and that’s just in one month. As one of the leading BTC miners globally, we highly recommend keeping BITF on your radar.
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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.
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Emerging Markets
Music Licensing Inc. (OTC: SONG): Unraveling the 1250% Surge and Current Valuation
Published
1 year agoon
November 10, 2023Music Licensing, Inc. (OTC: SONG) shares skyrocket a whopping 100% gain at the time of writing, marking an incredible 1250% surge since their October low of $0.0004. Many appear to be wondering the cause behind the sudden rise and after today’s spike we decided to do more research. Let’s dig into the company and its recent updates to figure out how they’ve pulled off such an impressive climb and what might be coming next.
Background:
Starting with their name – Music Licensing, Inc., it is more commonly recognized as Pro Music Rights. If you’re diving into your own research, you’ll likely want to search by, “Pro Music Rights” to find the investor information you’re looking for, you won’t find much under the stock name alone.
In a nutshell, SONG is a performance rights organization (PRO) and was the 5th to be established in the United States. If that mean’s absolutely nothing to you, skip to the next title for a better understanding.
Nethertheless, they’ve got some big players under their license umbrella, including TikTok, iHeart Media, Triller, Napster, 7Digital, and Vevo. In total, SONG holds an estimated market share of 7.4% in the United States, representing a whopping 2,500,000 works.
Look out for familiar artists like A$AP Rocky, Wiz Khalifa, and Young Jeezy in their impressive lineup. For more details on other notable artists, their press releases have a comprehensive list for you to explore.
Again if the whole idea of a Performance Rights Organization (PRO) feels confusing, you’re not alone. We did some digging to break it down for you.
What’s a Performance Rights Organization:
To keep it simple, think of a Performance Rights Organization (PRO) as the backstage manager for musicians. It’s like the middle person making sure that when your favorite songs are played in public—on the radio, at concerts, or even on your go-to streaming app—the artists get their fair share of the spotlight. These organizations, such as ASCAP, BMI, and SESAC, keep tabs on where and how music is being enjoyed and make sure the right people get paid for their tunes. It’s a behind-the-scenes gig that ensures artists get a nod and a paycheck every time their music takes center stage.
Latest Press Release:
This morning on November 10th, 2023, the company announced it will be cancelling 59.9% of their outstanding shares to enhancing Shareholder Value.
“Following the cancellation of an astounding 1,566,945,290 common stock shares, which reduced the total outstanding shares to 2,000,000,000, Mr. Noch is now embarking on yet another groundbreaking endeavor. He has pledged to cancel an additional 1,197,364,785 common stock shares, equating to a remarkable 59.9% of the current outstanding shares”.
Taking the cancellation of all these shares would also mean their market cap would be effected pretty drastically as well. If we do the math (at time of writing), 2B shares outstanding multiplied by the current stock price of $0.004 would mean ~8M market cap.
Okay Jake, so you’ve done the share reduction dance, claiming it’s a boost for shareholders. But really, what else does cutting down on shares mean for investors. Allow us to further break it down.
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Why Does it Matter?
Cutting down on the number of shares a company has floating around might seem like financial gymnastics, but it actually makes sense for a few reasons:
- More Bang for Your Buck (EPS): Picture this – you and your buddies own a pizza joint. If you slice up the pizza into more pieces, each one gets smaller. The same goes for shares. Less shares mean each piece of the company’s earnings pie goes to fewer shareholders, so everyone’s slice gets bigger. That’s what we call Earnings Per Share (EPS), and a bigger slice is usually good news.
- Share Price Perk: When a company trims down its shares, it can potentially give its stock price a boost because the float is now tighter. With a tighter float, it doesn’t take as much buying to move the stock price in either direction.
- Steady Ship: Fewer shares mean fewer folks holding the reins. It’s like steering a ship – with fewer hands on deck, it’s easier to keep things steady. Reducing the number of shares available for purchase also makes it harder and more costly for others to buy a big chunk of ownership, fortifying the company against hostile takeovers.
- Improved Financial Ratios: Reducing shares outstanding can even positively impact financial ratios, such as earnings per share, return on equity, and book value per share. These improvements of course make their financial profile more attractive to investors by and large.
Financial Highlights:
Despite having a market cap of around $15 million on YahooFinance, or $8 million if we consider the share consolidation, SONG has posted impressive numbers for its financials. They’ve managed to rake in a substantial $758 million in revenues, pushing a solid net income of $39 million. Their quarter ending in June, 2023 showed 93M in revenue, which was also net profitable too. Digging into their balance sheet, you’ll find $45 million in assets and a modest $61,000 in liabilities. Given those figures, this valuation’s definitely a head-scratcher and seems completely off.
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Behind SONG’s Low Valuation:
According to one user, @StockPicksNYC, on Twitter there’s a story behind why their valuation is so low given their fundamental financial backing.
Apparently the stock’s low valuation can be attributed to a previous incident where a storm-induced power outage at the CEO’s residence led the company to a downgrade on OTC markets, pushing SONG into ‘Expert Market‘ status with a ‘Shell Risk’ label.
Despite successfully addressing challenges to regain ‘Pink Current’ status and remove the ‘Shell Risk’ designation, SONG is still unable to update its information on the OTCM platform.
This is a well-documented problem with OTCM and there’s ongoing litigation with OTC Link, (an OTC Markets subsidiary), revolving around transparency and responsiveness issues during efforts to resolve downgrade-related issues.
This has now pushed SONG to take further measures to safeguard itself and its shareholders. They currently have a lawsuit filed against OTC Markets, where they’re pursuing $386.6 Million in Damages.
The good news is despite the lack of information on OTCM, SONG filed a Form 1-SA with the SEC to provide detailed information about their business.
OTC Expert Market:
If we look at the OTC Market tiers, there’s OTCQX, OTCQB, OTCPNK, OTC Expert Market, and OTC Grey. Back on September 28, 2021 the SEC put an amendment in place that stops brokers from quoting stocks without current information. That’s where OTC’s Expert Market steps in.
In a nut shell, any company that does not have current information publicly available trades on OTC Expert Market. Only broker-dealers, professionals or sophisticated investors are allowed to view quotations in Expert Market securities. It of course comes with massive risk given you’d be completely unaware of the company’s financial health.
Conclusion:
Among many factors, SONG’s impressive revenue and profits alone make the company appear considerably undervalued. Even without more developments, we can imagine a company of this caliber will inevitably draw increasing interest from investors. Considering the legal issues with OTC, a move to a bigger exchange like the NYSE or NASDAQ seems likely. They’d atleast be a great candidate considering the fundamentals. Keep in mind, this dynamic story could change at a moments notice, so be sure to keep them on your radar.
We will update you on SONG when more details emerge, subscribe to Microcapdaily to follow along!
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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.
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Emerging Markets
Lucy Scientific Discovery’s (NASDAQ: LSDI) Game-Changing Move: A Closer Look at the High Times Acquisition
Published
1 year agoon
September 8, 2023On August 8th, 2023, Lucy Scientific Discovery Inc. (NASDAQ: LSDI), a leading developer in the psychedelic drug industry, witnessed an impressive surge in its stock value, gaining approximately 25% in combined trading, including after-hours (AH) trading. The British Columbia-based company made headlines by announcing its strategic move to acquire intellectual property (IP) from the renowned cannabis publication, High Times Holding Corp. (HHC).
Additional Background:
Under this agreement, Lucy will exchange 20% of its shares and a series of payments for access to HHC’s valuable IP portfolio, which includes the rights to generate licensing and royalty income from renowned brands like High Times, 420.com, and Cannabis Cup, along with their associated domain names.
The partnership between #HighTimes and #LucyScientificDiscovery just makes sense. It's a harmonious alignment that should lead to success. This could be the start of something special as they journey towards ambitious goals.$LSDI $TSLA $SPY pic.twitter.com/qgXYkKQVoe
— Luca Grayson (@GraysonLucasa) September 7, 2023
Lucy’s commitment involves making semi-annual payments to HHC over a five-year period, structured around earnings before income, taxes, depreciation, and amortization (EBITDA) generated through the acquired IP. The flexibility exists for Lucy to fulfill these payments either in cash or through stock issuance and the announcement is generating considerable interest.
Furthermore, post-acquisition, Lucy will grant High Times the opportunity to operate retail outlets and distribute THC products bearing these prestigious brands within the United States. This privilege comes in exchange for an annual license fee of $1 million, set to double to $2 million annually once federal legalization of cannabis occurs in the country.
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Leveraging the brand rights secured from HHC, Lucy aims to bolster its revenue streams by expanding and enhancing its existing 18 licensing agreements, both domestically and internationally. These arrangements encompass a wide array of consumer products and merchandise, promising to further establish Lucy’s presence in the global market. The acquisition is expected to be finalized within the coming two weeks, marking a significant strategic move for Lucy Scientific Discovery Inc.
As a result of the acquisition, High Times is now a publicly-traded entity. Lucy anticipates that this agreement will contribute over $10 million in revenue to its financial results in the upcoming year, along with $5 million in EBITDA.
By purchasing #HighTimes assets, Lucy Scientific Discovery has struck gold. It has acquired a wealth of intellectual property, trademarks, and royalty prospects that will bring #LSDI $LSDI #lucyscientificdiscovery millions of dollars. pic.twitter.com/CEkqQnuFHm
— Rowan Dune (@rowandune) September 7, 2023
Adam Levin, the Executive Chairman of HHC, expressed optimism about the deal, noting, “This transaction will create exciting new growth opportunities for the High Times brand, under the leadership of Richard Nanula, a seasoned executive with extensive experience in major consumer brands and global corporations.”
Levin also emphasized High Times’ enthusiasm in becoming a significant shareholder of Lucy Scientific Discovery. Notably, Lucy completed its initial public offering and Nasdaq listing in February, offering 1,875,000 shares at $4.00 each.
Richard Nanula, CEO of the British Columbia-based company, shared his outlook on the acquisition, stating, “Lucy expects this acquisition to rapidly generate high-margin revenue within the global cannabis sector.”
In recent developments, Lucy introduced the sleep aid product “Twilight,” which includes amanita muscaria and reishi mushrooms. Additionally, the company joined forces with Wesana Health Holdings Inc. (OTCQB: WSNAF) in March to collaborate on the development of the CBD and psilocybin-based drug SANA-013, targeting conditions such as migraines, cluster headaches, and major depressive disorder.
$LSDI's Health Canada license allows approved psilocybin sales, backed by the Canadian government's significant funding $LSDI is on fire. #LucyScientificDiscovery $LSDI
— William James (@jaym_willy) September 8, 2023
High Times, founded in 1974, has a rich history, featuring works by renowned writers like Truman Capote and Hunter S. Thompson. Since 1988, its Cannabis Cup has stood as the most prestigious cannabis competition globally, with notable judges including Snoop Dogg, Joe Rogan, Tommy Chong, and other prominent figures in the cannabis industry.
While Lucy’s shares showed a nearly 16% increase to reach $0.68 on the Nasdaq exchange on Friday, it is worth noting that they have experienced a decline of over 77% over the past year.
Macro Trend:
In recent times, our articles have prominently featured cannabis-related topics, reflecting the growing popularity of stocks in this sector. LSDI’s acquisition aligns perfectly with the current climate, as the cannabis industry experiences a significant surge, coinciding with the Health and Human Services (HHS) exploring the possibility of reclassifying cannabis from Schedule I to Schedule III of the Controlled Substances Act.
Don't overreact to temporary $LSDI EPS decline. Psychedelics mega-trend makes risk/reward compelling.#Shrooms#LucyScientificDiscovery
— gianna snell (@skatette) September 8, 2023
While many countries around the world have already moved towards decriminalization and legalization, the United States has been relatively cautious in its approach. However, the consideration of such a reclassification represents a potential historic turning point. If such a change were to materialize, it would mark a substantial shift in the regulatory landscape, potentially revitalizing cannabis as an attractive investment opportunity. The industry is already showing signs of reestablishing its market presence and could once again become a noteworthy investment option.
I know this Mindful line is set to disrupt the market. Expecting a surge in stock price in the months ahead. #Lucyscientificdiscovery $LSDI pic.twitter.com/2ccR1CttA3
— Tom (@Tomi_l33) September 7, 2023
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Picture by herbalhemp from Pixabay
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