A journey into the Cannabyss

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A journey into the Cannabyss

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Published Date: 2021-06-09 | Source: INCE|Community | Author: The Finance Ghost

A journey into the Cannabyss

You can tell a lot by just skimming through a list of SENS announcements.

Just this year, there have been two SENS announcements from Nutritional Holdings (NUT) that started with the word "correction" and another two that started with the word "resignation".

With a nod to Henry Ford - you can have any colour flag, so long as it's red.

Alt-X listed companies have Designated Advisors who help them navigate the listings requirements of the JSE. The Designated Advisor of Nutritional Holdings resigned on 26th March. Just a few days later, the company secretary also resigned.

There was nothing to worry about here. Nothing at all.

Just before the resignations, NUT had tried to get in on the crypto action by issuing an invitation to shareholders to participate in an Initial Coin Offering (ICO) for a cryptocurrency known as CannaCrypt. Yes, as you may already be suspecting, this coin was an alternative fundraising mechanism for the group's cannabis business.

The invitation to participate claimed that a R20,000 investment would turn into R2.4m within a decade. Even the most accomplished Instagram forex scammers would be embarrassed by a claim of that magnitude. The letter was poorly written and littered with errors.

The actual funding vehicle was structured outside of the group, controlled by one of the executive directors of NUT. The company's argument was that this vehicle was outside the scope of the JSE Listings Requirements as the funding vehicle wasn't part of the listed group.

That's a difficult argument to win when an invitation to participate was sent to the shareholders of the listed company.

Fast forward to mid-May and the director in question resigned from that funding vehicle in order to remove any potential conflicts of interest. Without passing judgement on the concept of raising cryptocurrency funding to invest in cannabis, even the basic structure didn't look good in a listed environment.

Behind the scenes, the JSE was all over NUT like a rash for various breaches of the JSE Listings Requirements. This culminated in a suspension of trading on the 26th of May.

If that wasn't enough this year, the company told the market that subsidiary Nutritional Foods was being put into business rescue. A few months later, another SENS went out noting that the CEO of that subsidiary would be buying the company from NUT. It also clarified that the business had not in fact been put into business rescue.

In perhaps its most "normal" newsflow of the year, NUT also dealt with a supply issue based on Covid requirements for export to international customers, although that was sorted within just a few days.

You can never keep a good company down, so the logical next step after having the listing suspended was to implement a share consolidation. This meant that shareholders would receive one share post-consolidation in return for each multiple of 25 shares held pre-consolidation.

But wait folks, there's more.

Yesterday, the company released a trading statement to the effect that the previously disclosed interim results for the six months to August 2020 were not correct. This is because the new auditors figured out that under IFRS 10 rules, the holding company didn't actually control Nutritional Foods and therefore it should've been accounted for as an investment, rather than consolidated by NUT.

Just over 90 minutes after the trading statement came out, yet another SENS was launched from the NUT desks. This time, it confirmed that the CEO is stepping down due to ill health and that the incoming CEO is none other than the same director who sat in the crypto funding vehicle!

Stay tuned for more exciting news from the Cannabyss.





3 Comments

Nirusha Brijball 3 days ago

A interesting read.

Prineshen Moodley 4 days ago

Great article, loved the flow and humour.

Guy 4 days ago

This is the last stand for the JSE credibility wise as lower income level investers flocked to the 1c stock. These people have their hopes and dreams on companies like this. This situation better be rectified soon by the JSE. Their track record of defrauding investors is mounting.



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