While the cannabis sector was extremely hot in the last year, Namaste Technologies (NXTTF) stock has been one of the biggest failures. The company focused on building an online medical cannabis business and the market has shifted away from medical questioning the need for telemedicine applications. In addition, so many corporate red flags have the stock justifiably down to $0.50 where investors should stay far away.
So Many Red Flags
Going back to last September, Namaste Technologies appeared headed to great success. The company reported August revenues alone of $1.65 million and growth of over 300% for their Canadian websites.
Shortly before the Canadian market allowed recreational cannabis sales, Citron Research published an article claiming outright fraud by the management team of Namaste. The company has all but imploded during 2019.
Suddenly, the company headed for a NASDAQ listing and a successful online medical cannabis platform is in substantial turmoil that no investor can touch. Over the course of this year, the company commenced legal action against the now ex-CEO, replaced the auditor and changed several members of the board of directors.
Now the company is still non-current with filing the quarterly report for the quarter ending February 28 as the calendar flips to May.
Lacking Corporate Update
The company provided a corporate update back on April 25 where limited details were provided. The one big update provided was the addition of Kenneth Jones to the board of directors and chair of the Audit Committee. The biggest positive is that Ken was a Partner at PWC, but the lack of industrial experience or other related positions lacks the credentials Namaste needs to repair damaged investor confidence.
The company still has an interim CEO and the corporate strategy updates provided limited details regarding how the business is doing during this disruptive phase of the last few months. Namaste MD and CannMart might have improved user experiences, but the business has likely lost customers.
The purchase of Pineapple Express delivery services and the entering of the edibles market with a 49% position in Choklat all sound promising, but the company is still very high on promises and very low on results. The proposed marketplace for licensed producers and cultivators and devices is still under development with the company spending heavily for technology and infrastructure.
Takeaway
The key investor takeaway is that Namaste needs to file quarterly results and hire a full-time CEO before even entertaining an investment in the stock. The market valuation at ~$160 million is still very rich for a business with limited sales and no profits. Not to mention, the high likelihood exists that quarterly results will struggle during a period where the market shifted away from medical cannabis with access to recreational cannabis in Canada and the corporate disruption likely impacting results and scaring off customers.
The best advice here is to stay far away from Namaste Technologies until the dust settles. If the company hires a top notch CEO and builds an incredible marketplace, investors will have plenty of time to buy the stock in the future.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.
Disclosure: The author has no positions in Namaste Technologies stock.
