HempFusion, Inc.
HempFusion is a Colorado-based health and wellness company specializing in full-spectrum CBD hemp product formulation and distribution. The company is focused on providing innovative and diverse proprietary formulation using the power of whole-food hemp and marketing premium consumer-specific product lines across multiple distribution platforms. HempFusion is currently pending an IPO on the Toronto Stock Exchange and will be available soon
Will this stock be a strong buy?
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HempFusion Fundamental Analysis
Profile
HQ: Denver, Colorado, USA
Incorporated: 2015 in Georgia, USA
Symbol: CBD (TSX) – Coming Soon!
Focus: Neutral
HempFusion is a CBD company. They manufacture and distribute their health-based products to over 3,000 retail locations. They come from a regulatory perspective so many of their products have regulatory approvals that their competitors do not. They also sell probiotic products internationally.
Size: Weak (Until listed)
Market Cap: US $NA
Enterprise Value: US $NA
# of employees: 33+
Markets: Strong
Secondary: Canada, South America, Europe
Majority Subsidiaries: Probulin Probiotics
Operations: Neutral
Cultivation:
Current production: None
Future capacity: None. They will source their CBD from Europe which ensures it is 100% USDA organic.
Distribution:
Direct sales: Through e-commerce sites.
Store networks: Over 3,400 retail locations in 47 states. Targeting a network of over 26,000 stores.
Integration/Diversification:
Vertically integrated: No
Horizontally diversified: Yes
Financials: Neutral
2019 Revenue (unaudited): $3 mil
Outstanding shares (diluted): NA
Management: Strong
Co-CEO: Jason Mitchell
Co-CEO: Ian Dequeiroz
CFO: Bruce Valentine Jr.
CRO: Jon Visser
CMO: Ola Lessard
Management has very strong product development experience (Mitchell) as well as strong financial experience. The team led Organigram, Emblem, and The Green Organic Dutchman in Canada. This is one reason they are listing in Toronto.
Branding: Strong
Their CBD brands are HempFusion Energy, Mind & Body, Sleep, and Stress. They also have an OTC approved line of topicals, creams, and ointments. The OTC designation means they can actually make health claims (pain, acne, etc) which is a substantial distinguishing factor from their competitors. They also have the probiotic brand, Probulin, a line of health-focused dietary supplements.
HempFusion Investor Deck
HempFusion Technical Analysis (Coming Soon!)
Should I buy HempFusion Stock?
Brandon Colwell sits down with HempFusion’s Chief Corporate Officer Danny Brody to get the answer to some of the pressing questions on investors minds leading into their IPO financing round and soon to be go public date.
HempFusion (TSX: CBD)
Remember sound cannabis stock trading strategies include both Fundamental Analysis and Technical Analysis.
Fundamental Analysis Continued
Valuation: Neutral (until listed)
Current share price: US $NA
Estimated to IPD from 0.90 to 1.35
Price to Sales: NA
EV/Revenue: NA
Price/book: NA
Financing: Strong
The company has around $18 million in cash on hand and reports no debt. Recent investments from RADD Capital also give them additional access to capital if needed.
Risks: Low
The risks of investing in any cannabis or hemp company are currently high given the newness of the market. Given their strong brands, cash on hand, and regulatory prowess, these risks are minimized.
Bottom Line: Is HempFusion Stock a Buy?
Recommendation: Strong
HempFusion is a CBD company with a health and regulatory background. They are about to be listed on the TSX under the ticker CBD. That is a memorable ticker. Their offering will be for $7 million in shares and $10 million of units. Each unit is for one share and 1/2 warrant. There is a nice timing play as well as the offered shares, unit shares, warrants, options, and warrant shares all have staggered hold periods which should ensure volume for an extended period of time (18 months).
The prospectus for this offering lists funds raised will be used for R&D on new products, marketing and e-commerce efforts, and general scale up. The company has targeting almost 20,000 more retail locations for expansion.
HempFusion Wellness has over 46 SKUs with many more in development. The CEOs background as a product formator in the dietary supplement industry should be invaluable (he made over 300 SKUs in that past life). Their strong regulatory experience also will come in handy with OTC listed products as they can make health claims – something all their competitors cannot do, and they understand how to play federally with their self-affirmed GRAS (generally regarded as safe) designations to the FDA.
They’ve reported over $18 million in cash, with no debt, which is always a good sign. The targets for the offering price is currently between $0.90 and $1.35 but we wouldn’t be surprised if this shot up to over $5.00 in the short term after the IPO. Scaling is the name of the game here as their direct competitors (Charlotte’s Web and CV Sciences) already have market caps over $400 million. If they can grow wisely and get their strongly branded products in more and more stores in the USA, Europe, and Latin America, then they should see revenues triple or more.
Keep a close eye on this IPO and watch for prices to soar in the short term. If you want to invest in the CBD industry, we’d strongly recommend considering a position in HempFusion (TSX: CBD).
