Cronos Group Inc. (TSX: CRON) (Nasdaq: CRON) has taken the market on a roller coaster ride this week and we believe our readers should be aware of the volatile price swings.
The Canadian Licensed Producer (LP) started the week on a positive note and the shares surged more than 25% higher on Monday. We believe the rally was a result of rumors that are related to Altria (Nasdaq: MO) acquiring the remaining ownership interests of Cronos.
A few years ago, Altria invested more than $1 billion in Cronos and has the option to acquire the rest of it. When the investment was initially announced, many analysts expected Cronos to record rapid growth through inorganic and organic growth initiatives. Since then, the story has not advanced as expected which has put considerable pressure on Cronos.
The day after Cronos jumped more than 25%, the management team filed a Form 12b-25 with the US Securities and Exchange Commission (SEC) and reported to be unable to complete its financial statements for the three and nine months that ended on September 30th because. The management team said it needs more time to evaluate goodwill and indefinite-lived intangible assets for impairment.
Cronos expects to record a more than $200 million impairment charge and may incur an additional impairment for the quarter that ended on September 30th. Although the impairment charge is not expected to impact cash and cash equivalents or revenues, the market has not responded favorably to the development.
Although Form 12b-25 provides a company with a five-day extension to file financial results, Cronos does not expect to file quarterly financial results during the extension period. We will monitor how the market responds to the missed filing and plan to continue to closely follow the trend. The recent volatility leads us to believe that a significant development could be reported and this is a business that our readers should be aware of.
Cronos is a global cannabinoid company that has international production and distribution across five continents. The company is focused on building disruptive intellectual property (IP) by advancing cannabis research, technology and product development. We are favorable on the diversity of the business and will monitor how the story evolves in the near-term.
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