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Over the last few weeks, India Globalization Capital’s (IGC) Chairman and CEO Ram Mukunda has been selling a lot of stock in his own company. During this time, Mukunda sold 275,000 shares in the $0.40 to $0.51 range.
What we find to be interesting about these sales is the timing of them. For a company that claims to be in the middle of a major turnaround, you must question why the person running the company is selling hundreds of thousands of shares.
A Fake News Driven Rally
IGC has been a top performer over the last few weeks and the shares have come well off its recent lows. Although the rally has been significant, we do not buy into the catalyst that helped push the stock price higher.
Last month, IGC announced that it will be commercializing a treatment for Alzheimer’s disease through medical marijuana dispensaries. The company plans target Germany, Canada and certain medical cannabis states in the U.S. for commercialization.
Although this update seems exciting, IGC did not provide any detail when it comes to how they plan to execute on this strategy. IGC has been focused on this product for less than a year and we are not buying into this press release.
Doesn’t Have the Resources or Capital to Deliver
We continue to believe that the biotech industry will be one of the greatest beneficiaries of the legal cannabis movement, however, companies need to be well capitalized if they want to execute.
IGC is not well capitalized and the company does not have enough cash on hand to produce this product at scale. If the biotech firm plans to enter three countries at once, it must have several million dollars if it wants to execute effectively.
IGC CEO Ram Mukunda said that the product will be ready for commercialization in early 2018, which means that we are not going to have to wait too long to watch this initiative prove to be nothing but smoke and mirrors.
A Very Questionable Transaction
While we had our suspicions with IGC and its ability to execute, the recent insider sales make us even more convicted in our belief that IGC is nothing short of smoke and mirrors.
Although we understand that executives will sell stock sometime during their tenure, timing is everything…and the timing of these sales do not make any sense.
While we view the biotech cannabis industry as very profitable opportunity, we believe there are much better opportunities available and continue to prefer companies that are led by a management team with a proven track record of success, are well capitalized, and have a visible growth strategy.