Welcome to our Discover Cannabis series, where we publish in-depth research to introduce new cannabis companies to our coverage.
Body and Mind (otcpk:BMMJ) has been one of 2019’s hottest cannabis stocks with its close to 300% rise this year so far. Despite the spectacular rise of BaM in 2019, we think the stock has gone too far and a correction is inevitable. The stock remains a regional player with limited presence and mixed track record. We believe Australis’ recent investments might have drawn attention to the stock which fueled its recent rally. However, we believe fundamentals will triumph in the long-term and the stock price should return to levels that more appropriately reflect their growth profile and competitiveness.
Regional U.S. Player
Body and Mind (“BaM”) is a very small regional player operating in Ohio, Arkansas, and California. Most of BaM’s assets were from recent acquisitions and the company has a very limited operating history.
BaM currently operates a cannabis cultivation facility in Nevada and that has been its only revenue-generating asset at the end of last quarter. However, BaM was rejected for all four applications it submitted for retail licenses in Nevada, which was deeply disappointing. The company had highlighted Nevada’s retail license applications as key pillars of its growth strategy.
In Ohio, BaM recently consolidated its ownership in the entity that holds one dispensary and one production facility by acquiring the other 70% it didn’t own for $10 million. In June 2018, BaM paid $2.1 million for its 30% stake. The Ohio dispensary was opened and approved for opening in February 2019.
The latest expansion into Arkansas was announced in March 2019 through a partnership with a local operator. The partnership will develop a medical dispensary and a small cultivation facility. We expect the Arkansas operation