This licensed medical cannabis producer has set ambitious goals to target every area of the cannabis industry.
The company plans to turn its headquarters in Coburg, Ontario into the world’s largest hydroponic cannabis production site. This involves a massive expansion of its current growing space. While a joint venture will help finance the project, the company will also need big sales growth to justify its high market cap.
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FSD PHARMA INC., $0.73, symbol HUGE on the Canadian Securities Exchange (Shares outstanding: 1.3 billion; Market cap: $865.9 million; TSI Cannabis Quality Rating (CQR): ; www.fsdpharma.com), holds, through its wholly-owned subsidiary FV Pharma Inc., a license to produce marijuana under the Access to Cannabis for Medical Purposes Regulations. It received its licence on October 13, 2017.
The Canadian Securities Exchange (CSE), formerly the Canadian National Stock Exchange (CNSX), is an alternative stock exchange in Canada.
FSD Pharma is headquartered at the former Kraft plant in Cobourg, Ontario. It aims to transform the facility into the largest indoor hydroponic cannabis production site in the world. FSD intends to target all legal aspects of the cannabis industry, from cultivation and processing, including the production of extracts, to manufacturing, and research and development.
The company currently has just 25,000 square feet of growing space, but it has an ambitious expansion plan. Phase 1 of the plan will add 820,000 square feet, while Phase 2 will add another 2.9 million square feet.
FSD holds $35 million in cash, or about $0.04 a share. However, the company has formed a joint venture with Auxly Cannabis Group (Toronto Venture Exchange symbol XLY). Auxly (formerly Cannabis Wheaton) is to finance and construct FSD’s expansion plan. In exchange it will receive in perpetuity 49.9% of all cannabis (or cannabis-derived products, including any immature cannabis plants and any cannabis trim) produced at the facility.
The stock is likely to remain volatile and could move higher on investor momentum and interest in marijuana stocks. But FSD faces a couple of obstacles to lasting investment or business success. It needs to succeed with its ambitious expansion plans. It must then sell its significantly higher production into an increasingly competitive market. The company needs to accomplish all this to justify its $865.9 million market cap, let alone make lasting gains.
FSD Pharma has a 2-Leaf Cannabis Quality Rating (CQR). FSD does not inspire our confidence, and we don’t recommend the stock.
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