Growlife, Inc. (OTCBB:PHOT) Can’t Shrug Off Drop
After a turbulent week, Growlife, Inc. (OTCBB:PHOT) ended Friday’s session another 10% down to a close of $0.20 flat. The ticker swelled in volume once again, at 87 million shares changing hands, and landed on the #2 most heavily traded OTC spot.
The company has come up with a letter to shareholders since we last looked at its situation. In that letter PHOT‘s CEO goes to great lengths to encourage shareholders to support an increase of authorized shares to accommodate a $40 million joint venture financing from CANX USA and to reassure them that this will not result in a torrent of new shares flooding the market and diluting everyone.
Even though the letter makes every effort to explain that CANX will be in for the long haul, this doesn’t change the fact that the joint venture comes strapped with warrants for the purchase of 140 million shares at $0.03 per share, i.e. at a massive discount from the current market price. The kicker is probably the $1 million convertible note that is also part of the agreement. Upon conversion this $1 million could turn into PHOT common shares priced at $0.025 – a discount of nearly 90% from PHOT‘s last closing price.
Naturally, traders should think for themselves and interpret the letter to shareholders as well as the provisions of the CANX joint venture as they see fit. Financing that, while not toxic by strict definition, offers lots of discounted shares, combined with talk of upping the authorized share number doesn’t cast PHOT in a particularly good light.
The pattern that almost all marijuana stocks were following as one seems to have ended. On Friday Cannabis Science, Inc. (OTCMKTS:CBIS) broke the mold and managed a 21% green close, spurred on by yet another optimistic press release. With President Obama’s quote from his interview with the New Yorker that marijuana is ‘no more dangerous than alcohol’ getting massive exposure through news networks and discussion forums, when trading resumes on Tuesday, the entire sector will very likely turn white-hot once again.