Debra Borchardt
The sham that is Bright Green (Nasdaq: BGXX) continues again this week. Green Market Report wrote back in June about Bright Green, which involves tales of a burned-down building, a years-long battle with the state of New Mexico, a bankruptcy case, and an angry former CEO who is accusing the company of fraud.
Bright Green began trading on the Nasdaq as a direct listing, not as an initial public offering (IPO) this past summer. The stock shot up almost immediately to $58, but it has since sold off and was lately selling at $1.45.
Since that time, the stock has slid as low as 35 cents. In November, the company reported financial results for the quarter ending Sept. 30, 2022, recording a net loss of $25 million. It has an accumulated deficit of $32 million.
It stated in that filing, “The company does not have any short or long-term contractual purchases with suppliers for future purchases, capital expenditure commitments that cannot be canceled with minimal fees, non-cancelable operating leases, or any commitment or contingency that would hinder management’s ability to scale down operations and management expenses until funding is raised.”
DEA Deal?
The whole premise of this company is that it will have a deal with the Drug Enforcement Agency (DEA) to grow federally legal cannabis for research. That is how it convinced the Nasdaq to list on the exchange.
The most Nasdaq would say about this listing is that the DEA language is what gave them comfort in agreeing to list an American plant-touching company.
However, had the Nasdaq done its homework, it would have realized that while Bright Green did have a memorandum of agreement with the DEA, that does not actually mean it has been approved by the DEA. It still needs a certificate of registration from the DEA, which it doesn’t have.
It would also need a DEA-approved facility and a quota from the DEA. None of these exist.
$500 Million
Now the company is saying it is going to raise $500 million, which sent the stock higher. Bright Green priced the shares at $39.99. In the last five days, the stock jumped from 52 cents to $1.30. That triggered the stock jocks to pile on and some stock trading sites to cover the press release, giving it credibility.
However, anyone within the cannabis industry knows how tight capital is for companies actually making revenue, much less one with zero revenue. Keep in mind that LeafLink, which has processed more than a billion dollars in transactions has only raised $230 million. That’s a well-established company with solid revenue.
In addition, the industry is facing plunging cannabis prices and states with so much supply that the illicit market is full of cheap cannabis. Green Market Report recently wrote of ounces selling for as little as $60 in some stores.
Yet Bright Green says it is going to spend $300 million building a cultivation facility to pump out 5,000 pounds of cannabis.
An excellent deep dive into Bright Green from Shane Pennington on a substack called On Drugs also pointed out that there are already six companies approved by the DEA for research cannabis. The research pool is small and likely well-supplied by the existing approved cultivators. Why would they switch to an unproven source?
Pennington and his legal cohort, Matt, also discovered something disturbing in a cease-and-desist order from the state of New Mexico’s Regulation and Licensing Department — Securities Division (page 115 of the PDF bundle): a bombshell regarding John Stockwell. He’s the husband of the company’s majority shareholder, Lynn Stockwell. It states as follows:
John K. Stockwell has committed and/or is about to commit securities fraud in violation of NMSA 1978 58-13C-501
Short Sellers
Bright Green, which incorrectly describes itself as “one of the very few companies selected by the U.S. government to grow, manufacture, and sell, legally under federal and state laws, cannabis and cannabis-related products for research, pharmaceutical applications and affiliated export,” followed up its stock offering news with concern over short selling in its stock.
“The integrity of our stock is of the utmost importance to us and our shareholders,” said Terry Rafih, executive chairman of Bright Green. “With our recent EB-5 announcement, a lot of activity ensued and, we can see an underperformance of our shares compared to the market, which is a clear indication of the illegal short-selling activities that have taken place and these activities have had a significant effect on the value of our stock.
“We will not tolerate these illegal activities that artificially depress the value of our stock and we are committed to protecting the interests of our shareholders and ensuring that the value of their investment is not artificially depressed.” he said.
Perhaps the company isn’t happy that short sellers may have thwarted the effort to get unsuspecting investors to part with their money to buy this stock.
