To begin I am long FITX. Nothing written here is anything but my opinion and is not meant to influence any individual’s decision making process in regards to buying, selling, holding or not buying FITX stock. Please do your own research and make your own decisions in this regard.
So, everyone interested in FITX is wondering what will happen next. They are also wondering why no one from the company is keeping shareholders up to date with current happenings. It has been 22 days without any updates even though the share price has been suffering. I am going to write my opinion on the possible reasons why they are being silent, what it may mean for the company and for the shareholders.
First of all it needs to be mentioned that the shareholders that have been a part of Creative Edge Nutritions facebook page have been a bit spoiled. If you read early enough posts you will find common interchanges between Bill and the other members. This is uncommon, awesome, but uncommon. Most CEO’s won’t be interacting directly with the public outside of choreographed PR statements. The reason being is that anything and everything said will be taken literally, recorded and then thrown back at you or used against you. Every piece of information given is used by traders to fluctuate the stock price and unfortunately a lot of people can easily be misled. An example from an “investors message board” –
So these are posts on a board that may be visited by the average regular investor that is seeking out current information or any new information. What you end up finding is a wall of blind negativity facing a wall of blind positivity. The vast majority of these statements are garbage from people who will take any comment from the CEO and twist it to either a SUPER positive, go buy more shares outlook or a SUPER negative, get out while you still can outlook. The reason is that they are filled with traders. These are people who want day to day VAST fluctuations in price because this is how they will make their money. Many of the users of this message board have two accounts. One for making positive looking comments and one for making negative looking comments. The problem is that some messages and posts can be worded so well that they appear legitimate and these are the ones that utilize PR messages well. So this is a small reason why TOO many PR’s should be avoided and a possible mentality that they have in limiting direct conversation from the CEO going forward.
So the shareholders have been a bit spoiled in that regard and those that have been able to have direct contact with Bill in the past should cherish this fact but not expect it to continue into the future. All board members should be extremely busy if they are doing their job well so not receiving weekly PR statements should be expected.
One additional comment about PR statements is how they are in some way like moves on a chess board. The release of positive or negative news needs to be done politically in order to reduce the negative affect or increase the positive affect on share price and public opinion. What I mean by this is the following example. Say that FITX announces they did not get the license (THIS IS A THEORETICAL EXAMPLE – I DON’T KNOW IF THEY HAVE ONE OR NOT), right when they get this news from Health Canada they shouldn’t just release that information to the public without first thinking of what steps they are going to take to correct it. What they need to do is wait, plan their next moves, begin making progress on those moves and THEN make a PR statement along these lines, “Although we did not receive the license to grow here in Lakeshore, we have begun full scale production of hemp at this facility. We have also leased a building in an incorporated area of this town where zoning and bylaws will not be an issue.” You get the idea. They can’t make weekly updates because maybe nothing super constructive was accomplished that week or maybe there was a delay for that week that could alter public opinion negatively even though it has no bearing on the long term outcomes. Outline of how trivial daily updated PR posts could be.
Example:
Week 1 – Daily
Mon – Electrician showed up late, had to wait for conduit, plumber still waiting for plastic tubing and push in fittings. Made a phone call to health Canada, told that paperwork was still being worked through and to wait until they called, again. Meeting with BOD to discuss future plans
Tue – Plumber still waiting for plastic tubing. Made a phone call to health Canada, told that paperwork was still being worked through and to wait.
Wed – Plumber finally has plastic tubing and starts work. Made a phone call to health Canada, told that paperwork was still being worked through and to wait. Researched and contacted potential customers, booked travel to discuss sales contracts.
Thur – Made a phone call to health Canada, told that paperwork was still being worked through. Traveled to discuss sales contracts.
Fri – Completed setup of one pod. Met with security company to discuss additional needs and changes. Continued to travel to discuss sales contracts. Called health Canada, told to stop calling and that all these calls were delaying the process further.
-You see how trivial all of these posts were day to day? You see how a lot of this could have been used by traders to influence people’s opinion of the company. “Oh they can’t even hire a good electrician, how can they run an entire company!”
Example:
Week 1 – Weekly
Mon-Fri: Completed setup of one Pod, traveling to drum up some business and health Canada is still going through our paperwork.
-This can also be used all too easily. “Only one set of pods? Who do they have working over there, clowns?”
Example:
Monthly PR
November – Installation of the last pod is complete and we have received our license to grow.
-Can you see how avoiding mentioning the hiccups or small things that can be manipulated along the way leads to a PR that has much better scope and is not as easy to twist around with a negative connotation?
OK, enough with the examples. The point I am trying to make is that too much information turns out to be a bad thing. PR statements should be kept to major milestone achievements and if it takes 1-2 Months to get that kind of progress then so be it. You see weekly or daily posts from some penny stocks because they NEED to affect the share price and drum up some volatility so that insiders can sell their shares or so that the individuals that traded services for shares can actually sell them.
So, why the silence?
My first opinion would be that they simply have nothing to report at this time. They are still trying to outfit the entire facility and get it operational so that Health Canada can come back and make a final inspection (assuming they have had the actual pre-inspection already and the form that was leaked is not fake or just a consulting firms pre-inspection). Any PR statements now that are not directly related to forward progress made to get a license would affect the share price negatively, so in essence they need to be quiet until they have some news to that point. Staying quiet is already having a negative effect on share price simply because people become uneasy when they aren’t hit with constant verifiable news. This is especially true for those who got in early, are up 10’s of thousands of dollars and are thinking, you know, maybe I just sell a portion of my shares to make sure I lock in some profit on this just in case it turns out they don’t get the license. What everyone needs to understand is that even if they don’t get their license right away it doesn’t mean that it has become an insurmountable task. What I would actually like to see instead of the license, it would be even more positive in my opinion, would be a large sales contract based on future production. Say an order for 100,000 lbs (over a year say monthly shipments) for 2015 contingent on their ability to obtain a license. So the first possibility is that they have nothing to report and that no significant forward progress has been made. This could be a reasonable assumption at this point in the game.
Second possibility is that they have something good to report (license) but wish to combine good things into a larger PR announcement. So, rumors have spread on these sites of ill repute, that Cen Biotech already has the license to grow and that they are waiting until they grow their first crop and have it sold before making a PR announcement in an effort to maximize the effect of the good news. None of that is verifiable with any sort of authentic, backed by the company, proof. However, if this turns out to be the case then they will have to back up their PR statement with proof of sale if they are legally able and pictures of the fully functional pods if they can. Now I don’t generally want to discuss share price because I believe any discussion on it can lead to people buying, selling, holding or not buying the stock even if my intention is not to lead anyone in any direction. So please take everything I say with a grain of salt, do your own research and make your own decisions before choosing to do anything with any stock. I am also Long FITX to get that out there as well. So if this happens what a lot of people are touting is that we will hit “dollar land” as people are speculating. I don’t believe that is going to be the case. I could definitely see getting to the tens of cents because they can actually start to begin normal business operations but I don’t think we will get that high considering the fact that plenty of businesses get to the point of being able to produce their product but raising awareness and actually being able to sell their product becomes the more challenging part. This is just my opinion though. I think they will reach the dollar mark when they start making the sales and can put the profit in the financial statements. This will especially be the case if they can produce anywhere near the types of numbers they have been claiming. I believe that to get to 1$ and up they will need to show that they can produce 1.3M lbs and sell 1.3M lbs all while turning a net profit that gives them enough capital to expand. Even if they don’t produce that much, if they can show that through normal business operations they can turn a profit without having to seek additional funding will be the turning point. Meaning that the business is now self-sustaining and should not need to seek out additional funding for new operations because it can fund itself. This would be a turning point because any investor could at least be sure that the company itself no longer has the need to distribute shares in exchange for additional funds or pay its employees in shares. I believe combined with being profitable they would also need to become fully reporting and remove themselves entirely from the OTC markets. Next they may need to do a reverse split or a buy back to get it up there. This could potentially stabilize the stock as well. However, I don’t know if public opinion of this company skyrockets and the future potential is seen right away and people are willing to take the risk we could see those numbers. We could also see the exact opposite. But enough about share price and again take everything here as purely my opinion. Make your own decisions.
Third possibility is that they were rejected and had to make fixes and re-schedule for another inspection for a later date. The reason not to immediately announce this is the fact that it could cause a lot of volatility, plus as I have said before, they are going to want to be able to add some damage control statements to the mix to include what progress they have made to fix the errors and reschedule the inspection. So if this is the case what we could expect to hear would be simply the results of the second inspection and an approval. They choose to omit the statement announcing their rejection and steps to make a corrective action and simply wait until the good news is available for all to hear. Maybe this process would only take a month and they decided to wait it out until they had good news to give. Or they could make an announcement that further difficulties have limited their ability to get a license at this point in time and they have decided to utilize the facility to grow Hemp in the meantime before a license is granted. Maybe they are trying to pursue the sale of Hemp as an immediate profit making mechanism to tide them over and want to get something on the books to ease the disappointment of the shareholders.
Fourth possibility is that due to some bylaw or some obstacle in their way they are prohibited from operating in lakeshore and need to pursue another venue. (NOTE THIS IS JUST HEARSAY NO PROOF OF THIS ACTUALLY TAKING PLACE HAS BEEN GIVEN) This is just a whisper I heard on another one of those sites that you need to take with a grain of salt. I have no idea whether this claim is entirely bogus and simply an attempt to alter the share price. I did not see any proof of this claim, so take it how you may. However, to discuss what would happen if this truly does become the case. If they have to sell their facility and move elsewhere this will be a major blow to them. This could be a worst case scenario discussion. They would have to find a buyer for the facility, try to get some of their lease money back if they leased the property for a years period or they may lose it all if the contract had no such contingencies. Then they would have to find another site that they know 100% without fail would work for them, the city, the townspeople, logistics, etc. If they are able to sell their facility for say roughly 70% what they built it for and have around 15-17 million left to build another facility then they would be in pretty good shape (numbers all theoretical, I don’t know their exact working capital but believe one financial statement I looked at said the facility at that point in time had cost around 8 million). If they can’t sell their facility or if they have to take a low-ball figure then they may not be left with as much. Essentially at this point they would have to start from scratch and hope that no more obstacles lay in their path before they actually start growing. So the reason they would want to keep this under wraps until they had a legitimate game plan is pretty self-explanatory. This is all just my opinion. (AGAIN NO PROOF THIS IS HAPPENING OR WOULD EVER HAPPEN).
Well there you have it, my opinion of what all this silence could mean. Please feel free to comment and let me know what your thoughts are and if you think I am way off base or you believe I fail to mention some other possibilities.
-Groves
TheStockAnalyzer 