Cannagrow Holdings (CGRW) does a great impersonation of a pump and dump

fire

Psst. Hey buddy, c’mere.  Cannagrow Holdings (CGRW) has some stock to sell you. Smoke smoke weed weed stock stock (do the park dealers still say that when you walk by?  I’m old).

drugsCGRW is sporting a nice rise to the $0.66-$0.67 range, up 3.91% over the past few weeks bolstered by the promise of a big pre-November harvest from the Buffalo Ranch property they oversee in Colorado, where Category One Botanicals, the licensed grower, handles the farming. More on those later.

CGRW touts itself as a turnkey consulting firm for marijuana growers. Which isn’t novel – frankly, anyone and everyone who has ever covered the inside of a college dorm closet with tinfoil and filled the thing with Ikea desklamps, now calls themselves a cannabis consultant.

And it’s that level of consultant that puts out bullshit news releases with ‘exciting’ quotes like these:

The opportunity to work with strains such as ‘Gorilla Glue,’ ‘Master Kush,’ ‘Jack Flash,’ ‘Biodiesel,’ and ‘Head Band’ is very exciting.

OMG! So exciting! According to Leafly, you can only get Master Kush in Colorado, California, Washington State, Illinois, Michigan, Oregon, Vancouver and Toronto – otherwise known as EVERYWHERE YOU CAN BUY MARIJUANA IN THE UNITED STATES AND CANADA.

acid

IT MUST BE SO EXCITING TO WORK WITH STRAINS THAT YOU COULD BUY BEHIND THE DUMPSTER AT DENNYS!

So weed. Very strain. Much high.

But CGRW is selling hard on the idea of their upcoming harvest, with press releases blanketing the wires (as well as their rather sparse public website) regarding approved construction, expansion, permits, new and excitingly named strains of Cannabis being added for cloning and cultivation, future projects, and a few excited stock monitors. All of this has the stock price looking very healthy indeed against a $67 million market cap valuation. That valuation jumps to $400 million if you convert the preferred stock, as NewCannabisVentures’ Alan Brochstein prefers to do when dealing with a potential miscreant.

And that’s when things start to get hairy.

CGRW, touting itself as the second coming of Chong, issues the stock.  Like, a lot of it.  Possibly, and stop me if you’ve heard this before, more than necessary for a firm still finding it’s sea legs in the cannabis industry.

Brochstein has seen this before, as have I.

As have you. As has Stevie Wonder.

From his 10 Reasons For Extreme Caution With Cannagrow Holdings:

Affiliate Brent Crouch, who holds 33mm shares as well as convertible preferred and convertible debt prepares the UNAUDITED financials.

crouch-conflict

Because that’s what you want from a company that’s gone from zero to a $67 million market cap in no time at all – the guy who owns a load of stock and lots of the debt doing your financials for you.

“Hey everyone, the finances of this thing look terrible. You should probably all sell your stock and just be safe because this shit is totally top heavy and about to collapse”.

– No large shareholder and debt owner, ever.

The stock looks as healthy as the next morbidly obese person tucking into their third bacon double cheeseburger, so I’d say it’s time to go on coronary watch and have an ambulance ready.

Problem is these guys may not even be able to cover the cost of a hospital gown.

As recently as August the company has struggled with net losses and has never been close to raising it’s head from the dark pool of debt it’s operating costs have plunged it’s financials. A Birnam Wood-sized march of ready-for-market leaf could be a savior crop, but the green needs to materialize soon.

From Ft.com 8/10/16:

Year on year, Cannagrow Holdings Inc had net income fall 45.55% from a loss of $1.11m to a larger loss of $1.61m, despite a 35.37% increase in revenues from $1.71m to $2.31m. An increase in the cost of goods sold as a percentage of sales from 83.48% to 91.43% was a component in the falling net income, despite rising revenues.

But that stock, she rises.  And CGRW, not one to let a good opportunity pass, has made sure that every preferred shareholder can make the most of that.

PS: You’re not a preferred shareholder.

Brochstein says, “Ugh. So many flags they should stick a UN building behind them.”

For starters, CGRW faces crushing debt levels and doesn’t reveal the terms. We’re not talking ‘we really hope you can afford your car payments, Bobby’ kind of debt, rather ‘if Godzilla and a Payday Loan store had babies, they’d be CGRW debt’.

Obviously, the company is making no SEC filings because, why be legitimate? And their weird corporate structure means one company is having another company grow the weed on another company’s property and they all own bits of each other and nobody knows where the garage keys are.

Brochstein ID’ed CEO Delmarr Janovec from previous pump and dumps, all of which were littered with folks who now litter the partner/subsidiary roster, and who are on the receiving end of huge issuances of preferred series stock alongside a 17,000-to-1 reverse split, a popular move by Janovec previously.

Brochstein: “Janovec and [John] Hicks are ‘Nugro Industries’, which owns the land and financed a greenhouse to grow cannabis in Huerfano County, CO. They are paid rent by CGRW, which sub-leases it to Category One Botanicals, which is a Colorado MED license holder headed by Rodney J. Clawson. Clawson has long-established ties to Janovec. The lease payments by COB or consulting fees are not disclosed anywhere, so it’s unclear how CGRW will be compensated. Further, it’s not clear why COB isn’t dealing directly with NuGro, as there is no experience demonstrated internal to CGRW management. John Janovec, nephew of Delmar Janovec, and Jason Wells have no public record of cannabis cultivation skill.”

crotchonfireThere’s more, but the highlights speak for themselves. Move the shares around all you want, talk weed strains and building permits but teetering insolvency will always bear out in the hard numbers.

The overvaluation on this company gives one that flutter when you are at a great height feeling that prickly insane pull to the earth far below, their Oruborousian business model is suspect and with the company financials both unaudited and prepped by a major shareholder, with no SEC oversight, the whole situation is flat out alarming, even at the low end of the market cap.

Jump on the good times if you must, but if you don’t have some of that preferred series stock and a title above Head of Custodial Services at one or three of the various companies composing this enterprise who know exactly when to bail, you are leaping on a bouncy house that’s fixing to have the air turned off as the party vendor in the sad clown suit realizes it’s time to pack up.

From me, the only thing CGRW gets is my withering disdain for another pumperdumper clouding a difficult market swelled with scheming opportunists, and swathes of first time investors yelling “WEEDWEEDWEED” as they shove aside fundamentals and figure they’re geniuses.

Geniii?

-A Dankel Joint

— With file by Chris Parry because I couldn’t resist landing a few dropkicks against another pink sheet bullshit pump.

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