Why the Elixinol Global (ASX:EXL) share price is getting smoked today

The Elixinol Global Ltd (ASX: EXL) share price is being smashed today, down 14.3%. Here’s why this ASX cannabis company is being smoked
The post Why the Elixinol Global (ASX:EXL) share price is getting smoked today appeared first on The Motley Fool Australia. –

asx cannabis shares represented by pug dog pointing to blackboard with cannabis info on it

Elixinol Global Ltd (ASX: EXL) shares are plummeting today, going for just 18.5 cents a share at the time of writing, down 11.09%. The Elixinol share price closed at 21 cents on Friday and opened at 19 cents this morning before dropping to its current level.

At this share price, Elixinol is just 4 cents away from its all-time low of 14 cents a share, and a whopping 87% from its 52-week high. Since the start of 2020 alone, the company’s shares are down 63%.

So what’s going on here for the hemp products producer?

Why the Elixinol share price is going up in smoke

Today’s share price plunge appears to be connected to an ASX market announcement the company made this morning before market open. In this announcement, Elixinol told investors that an agreement it has with another company by the name of Pet Releaf has been terminated.

Elixinol and Pet Releaf have been in a manufacturing and supply arrangement since August 2019. Under this agreement, the two companies would be “long-term partners”.

But according to Elixinol:

The contributions from the Agreement have not been material to Elixinol Global’s operations and given the global COVID-19 pandemic has created challenging trading conditions for the industry, the parties agreed to formally terminate the Agreement on 18 December 2020 [US Pacific Standard Time] with a mutual release.

A contributing factor to this breakdown was also a shift in focus for Elixinol. The company stated that:

Elixinol entered into the Agreement with a strategic view at that time of Pet Releaf being a long-term partner of Elixinol. Since that time, Elixinol Global has revised its commercial strategy by focusing on the distribution of higher margin Elixinol-branded products, rather than supporting private labelled products to which the Agreement relates.

However, Elixinol assured investors it will continue to “focus on the strong relationship with Pet Releaf”. It notes that Elixinol still maintains a 25% equity interest in Pet Releaf. It stated, “the Company continues to look forward to supporting Pet Releaf’s strategic focus on increased product offerings and distribution of high quality hemp-derived CBD pet products in the market”.

Investors light up SPP

Elixinol has also made a separate announcement to the ASX today regarding its recent share purchase plan (SPP). Last week, Elixinol told investors its SPP had been heavily oversubscribed. Applications totalled $27.2 million, well over the initial $2 million expected. As a result, the company expanded the SPP size by an additional $12.3 million.

Today’s announcement confirms management’s belief that the company is well capitalised as a result of the SPP. But the “strong third quarter” the company has recently had will not be spilling over. Elixinol included some remarks from its chief executive officer Mark Horn on the matter:

The fourth quarter certainly is not the quarter that we expected to have… simply because COVID has had a significant impact on our businesses in the UK and Europe. We had more head winds than we expected, so I certainly see that the Q4 quarter is for us one of the more challenging ones compared to the previous quarter. But the reality is that we are really well positioned given that we are a wellness product with great distribution and new growth catalysts.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Elixinol Global (ASX:EXL) share price is getting smoked today appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!