During the last quarter, the cannabis industry has been under pressure and has faced several headwinds. One of the biggest issues that the sector is facing is related to a significant increase in the number of vaping related health issues. Another major issue that is impacting the cannabis sector is related to liquidity as companies do not have enough capital to execute on previously announced growth initiatives.
We have been closely following the cannabis industry and have been analyzing hundreds of publicly traded cannabis companies to better understand the issues that these businesses are facing. Through our analysis, we have been able to determine which companies are well capitalized and are better positioned for growth as we head into 2020.
One company that we have been excited about is Vapen MJ Ventures Corporation (VAPN.CN) (VAPNF), which is highly levered to the US cannabis market and has been nothing short of an execution story. Although we are impressed with the way the fundamental story has advanced so far this year, Vapen has been under pressure and we believe that much of the weakness is related to the vaping health crisis.
During the last quarter, Vapen MJ has reported several major milestones and has visible catalysts for growth. With regard to the vaping health issue, the company was ahead of the curve and issued a statement to clarify this aspect of the business. In the update, Vapen stated that its products are made with 100% distilled cannabis oil with a low number of terpenes for flavor and strains that do not contain Vitamin E acetate.
A Leading US Cannabis Brand to be Watching
Since inception, Vapen has put an emphasis on product quality, especially as it relates to the removal of solvents and impurities and has established a reputation for being a premium product provider. In a market where safety is of the utmost importance, Vapen is well positioned to capitalize on the cannabis oil market. Going forward, we expect to see the vast majority of illegal cannabis operations shut down and for the company to be a beneficiary of this development.
In September, Vapen reported impressive second quarter financial results and we are favorable on this aspect of the story. During the quarter, the US cannabis company reported $1.2 million of net income on $6.7 million of revenue. When we look at other cannabis oil operators, we are impressed with these numbers and believe that the market underappreciates this aspect of the story. Over the next year, we expect the market to become more concerned with profitability and we are favorable on the way that Vapen’s management team has been focused on this.
Vapen is led by a management team that has a proven track record of success and diverse expertise. So far this year, the company has announced several strategic additions to the leadership team and to the advisory team and we are excited about these changes. The management team is highly focused on improving profitability by generating additional revenue and by cutting costs where needed. We expect 2020 to be a banner year for the business and will monitor how the management team continues to drive the story forward.
A Company with Visible Catalysts for Growth
When looking at the Vapen opportunity, there is a lot to be excited about. During the last year, the company announced several advancements on both the CBD and the THC sides of the business and we believe that this aspect of the story is not fully appreciated by the street. We have highlighted some of the most important developments that were reported by the company and believe that the market needs to be aware of these milestones:
- Enters the Las Vegas THC market: Earlier this year, Vapen announced the entry into the Nevada THC market through a letter of intent with Pegasus. This is a market that we are excited about and will continue to closely monitor this aspect of the story.
- Expands into Kentucky: In June, Vapen entered the Kentucky hemp-CBD market through a partnership agreement with Emerald Pointe Hemp.
- Enters the Hawaii Hemp Market: In August, Vapen announced a new equity partnership with Archipelago Ventures, a strategic joint venture with Legacy Ventures and Arcadia Biosciences (RKDA) that is focused on the Hawaiian hemp market.
- Expands its reach in Arizona: In August, Vapen CBD executed a strategic partnership with CBD Emporium which has nine retail stores in Arizona
- Enters the Oklahoma THC market: In September, Vapen announced a cannabis THC production and extraction partnership with Texoma Herb Company in Oklahoma.
A Turnaround Story in the Making
Although Vapen MJ has been nothing short of an execution story and has been expanding into new markets, the shares have been trading lower with the rest of the cannabis market and this is an opportunity that we are excited about. During the last quarter, Vapen has plunged lower and we believe that the weakness is transitory.
Vapen has been impacted by the vaping related health crisis and we believe that the weakness is overdone. As we head into the final months of 2019, we are taking an in-depth look into businesses like Vapen to better understand the companies that are well positioned for growth in 2020. We find the company’s risk-reward profile to be attractive at current levels and will monitor how the management team continues to execute.
Over the next few months, we expect to receive important updates from the company and this is an opportunity that is on our radar. To learn more about Vapen MJ, please contact email@example.com to be added to our distribution list.
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