So its fair to say I am a big fan of Love Hemp, but I am not a lover of the SP, currently sitting at 3.20p, question is WHY is it so low when they are doing so well? Sales are up, beating their own records. Signing of UFC and Anthony Joshua, expected to move to Main Market within weeks and listing on Amazon imminent. So what gives? At 7mil mCap this company could end up a take over target. After recent raises they likely have close to this in the bank and with sales showing no sign of slowing could pay dividends in the next year or two. I have looked at the available data and drawn my own conclusions, this what I think but I could be wrong and nothing here should be considered financial advice.
Reason 1: Aquis Stock Exchange, like it or not liquidity is not as good as the main market or Aim. Many brokers dont offer shares on this market and those that do require a limit order or a telephone order, this is a hindrance but not terminal and we are still seeing serious buying. This would explain some drag on the SP but not the full story.
Reason 2: The Warrants…. As per the Interim Results dated 31st March 2021 there were 103,320,600 Warrants outstanding exerciseable at 1p until 2023. There are additional warrants exercise-able at 5p, unlikely to be converted until at least 5.5-6p but more likely as we have seen with the 1p warrants 2-3x face value so 10-15p. To date we have seen 2 notices of exercise, here on 14th April and here on the 17th May, for a total of 44,914,285 million shares. Despite vesting in early Feb 2021 the daily volume at Love Hemp was tiny and only from the 15th Feb did volume start to explode with a spike to 8p, its likely this is when the warrant holders began to sell down. In 2 months to 14th April it appears 10mil shares were sold and then exercised, but then in the space of a month a further 35mil shares exercised and sold. This escalation is good news for existing shareholders, the sooner the warrants are gone the better. Provided this pace of selling has continued or even increased then its likely since 17th May, 29 trading days, with average daily volume of about 3mil that another 30-40 million shares could have been forward sold.
So What? Well assuming I am correct, this is a big assumption, then from the 103mil 1p warrants its likely that only about 20mil warrants are outstanding. As we approach the end of these warrants interest will perk up as people who were waiting for the end realise now is a good time to jump in. We are also approaching Main Market listing time, when this happens the increased liquidity will help churn any warrants in no time.
I hold a small number of shares in Love Hemp and only cover shares that I am invested in and plan to hold for the medium to long term. I believe this share is massively undervalued however the reasons for this are understood, temporary and unlikely to have any material negative impact to the company which makes it a strong hold for me. Do your own research before trading, this should not be taken as financial advice or a recommendation.