Halo Collective HCANF stock is a cannabis stock that has been rife with issues: overpromises and underperformance. And, investors also have to deal with a CEO that overpays then dilutes its shares as rapidly as it can. It is impossible to keep up with share count. So, what could possibly merit an investment in HCANF stock? It looks as if the best way forward is for Halo to get acquired. And, while being grilled by disgruntled investors, commenters felt his answer leaned toward this as a likelihood. Given that, if you look at the book value that is there with HCANF, and the Price-To-Book-Ratio, there is a lot of potential upside given the holdings that Halo Collective has.
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Halo Collective & Akanda
Halo Collective recently spun off Akanda as a separate company. And, Akanda recently did its IPO. Initially, about November of last year, Halo sold 13M shares of of Akanda in the initial round of the deal for $1.00 per share. Akanda Corp. sold off 4M shares in its IPO for $4.00 per share to raise $16M for working capital and operations. Halo still has 12.4M shares of AKAN stock which the current price is some $8.96 per share. That gives Halo Collective some $115M in additional total assets & equity.
This will show up in the next Halo Collective financial release. Halo currently has some 27M shares outstanding, according to its latest MD&A. Given this, the book value, along with the current total equity of some $66.5M, brings total equity up to approximately $6.61 per share.
The market does not necessarily live & die by book value. But, it is a method of valuation that is important to understand. The reason is that Halo Collective may get acquired.
What if Halo Collective Gets Acquired?
In a recent video where CEO Kiran Sidhu was grilled by shareholders, one of the questions he fielded was regarding getting acquired. This would be a good path forward for a company that has been rife with issues about overpromising and underperforming.
But, the current stock price is some $0.23 per share. However, book value has the company at $6.61 per share. If Halo Collective were to get acquired, an acquiring company would have to pay for that book value because that is essentially cash. This means Halo Collective is below a Price-To-Book-Ratio of 1. And, it is significantly undervalued.
Halo Collective Financial Statements
Here are the most recent financial statements for Q4 2021.
Halo Collective Gross Profits
As for general performance, expectations were given by management of some $75M in revenue for 2021. Revenues missed in a big way. This came from many issues stemming from delays with opening dispensaries due to COVID. These dispensaries are now opening up and have the potential of creating revenue. But, they are also a cash burn issue. And, Halo does not have the cash to float these kinds of operations. So, they will have to do what they always do: Go to the cash machine and issue more shares.
Issuing even more shares will dilute the operations even further. This is likely to be the biggest issue moving forward and makes analyzing Halo Collective so difficult. Given this, any investments in HCANF stock would need to be done so cautiously looking toward cash on hand and cash burn rate.
In the meantime, owed to a significant drop in wholesale prices in cannabis prices in California, Halo has printed negative gross margins.
Halo Collective Operating Profits
Operating efficiencies are well above 100%. But, now that revenues should increase, this would mean on a ratio basis, this will improve. But, again, it goes back to the cash burn rate which is roughly $3M – $4M per month. And based upon the latest financial release, there is about one month’s worth of working capital available.
Given this, Halo Collective needs to push its cash to a level that they can finally afford their monthly costs for a period of time until they get to EBITDA profitability.
Halo Collective EBITDA & Net Profits
Negative EBITDA does not portend the capability of achieving EBITDA profitability any time soon. And, with the drop in wholesale prices in California, this has driven gross margins to negative. And, with operating efficiencies well above 100% relative to revenues, effectively negative, there is significant gaps toward getting to the level of EBTIDA profitability.
EBITDA profitability being such an important achievement for a company once it starts producing and selling products, and the fact that Halo Collective is so far away from it, I see the potential of desperation here.
Halo Collective Cash On Hand
The cash burn rate is what continually kills Halo Collective. Every month they are burning through all of their cash and need to raise even more. This is where I start to see that Halo could not make it on its own and that the recent comment in the video would suggest they are actively shopping themselves and looking to get acquired.
One thing that is to note, the AKAN assets may not be sold or encumbered in any way. Halo cannot depend upon this asset to get it through to profitability.
Halo Collective Total Equity
As of the last print, total equity is sitting about $66M. But, they also have the AKAN stock shares which would bring in some $115M more in total equity. This is where I focus on a company that may need to be acquired and what it could be worth. But, the current share price is well off of where this book value is.
Halo Collective HCANF Stock Forecast
I usually wait for a company to achieve EBTIDA profitability in order to get to do the HCANF Stock forecast. Halo Collective may actually finally be getting to the point where they will see solid growth generate in their revenues. When they get closer to EBITDA, I will revisit this.
Is Halo Collective HCANF Stock A Good Investment?
It is all about book value with Halo Collective right now. Given the Akanda cannabis AKAN shares Halo is holding the book value would push this stock upward. I do not see a lot of hope with Halo Collective on its own given its current trajectory. Halo Collective needs to be acquired. Or, Halo Collective needs to sell its assets and call it a day and then simply sit on the AKAN holdings. Given that, when you look at the current equity of about $180M in book value, the stock would be acquired for the book value at the very least.
That is the best route for the company and shareholders.
Company Financial Statements
Halo Collective HCANF Stock Financial Statements
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One thought on “Halo Collective HCANF Stock Forecast & Analysis”
It’s difficult to give Halo another chance. Tempting, though.