Medican Enterprises Inc (OTCMKTS:MDCN) Crashes To Rock Bottom
Yesterday the stock of Medican Enterprises Inc (OTCMTKS:MDCN) got cut in half and lost 50% of its value. This left the ticker at the absolute bottom of the chart of $0.0001 per share while a little over three months ago, at the start of April, the stock was trading at nearly 25 cents per share.
The chart of the stock is a total disaster and those investors who decided to hold on to their shares are now facing massive losses. MDCN’s performance gets even more depressing when you take into account the 1-for-10 reverse split executed on April 20 that failed to prevent the stock from crashing to even lower price ranges. But why were investors drawn to the company in the first place?
Back in December 2014 Medican announced that an agreement for the acquisition of a 67,000 sq. ft. property in Phoenix, Arizona. The company planned to lease the property as a marijuana growing and warehouse facility to licensed growers. The deal was expected to be closed during the first quarter of 2015. In January, this year, another agreement was signed this time for a 7,200 sq. ft. retail and commercial property once again in Phoenix, Arizona. The closing of the purchase was supposed to be completed by January 31.
Many investors found the business plan of MDCN as quite promising and even though both of the deals suffered multiple delays and postponements many still hoped that the company will manage to complete them successfully. In our articles covering MDCN we warned you that the company should be approached with extreme caution. The atrocious financials, MDCN finished the first quarter of the year with $9298 in cash, working capital deficit of $9.6 million and $5.7 million loss from operations, and their inability to close even one of the deals within the announced dates should have made it obvious just how dangerous investing in MDCN really is.
And indeed, an 8-K filing submitted on June 18 dashed any hopes for a recovery of the stock – MDCN revealed that they were no longer pursuing the purchase of real estate in Arizona and California. A new shareholder update published on July 1 informed the market that MDCN is going to relocate to the state of Michigan. That will offer little comfort to the people who were lured by the numerous PRs about the Arizona deals.
Unfortunately, MDCN’s failure to execute their business plan is not the only problem around the company – the dilution of the common has been simply crushing. As we said earlier in late-April a 1-for-10 reverse stock split was implemented that left Medican with less than 50 million outstanding shares. As of May 20, however, the O/S had already surpassed 134 million shares. How many shares are there now?
We can’t be sure but let’s just say that during yesterday’s session more than 1.4 BILLION shares changed hands. According to the quarterly financial report MDCN had $7.6 million in convertible promissory notes and it is safe to assume that a large portion of the newly issued shares came at severely discounted prices as a conversion of said notes. The fact that recently MDCN increased their authorized shares to 10 BILLION is a clear signal that the printing of fresh shares may not be coming to an end anytime soon.