Vivid Inexperienced Makes an attempt to Lure Buyers to Its $500 Million Providing

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New Mexico says firm govt could have dedicated inventory fraud.

The sham that’s Vivid Inexperienced (Nasdaq: BGXX) continues once more this week. Inexperienced Market Report wrote again in June about Vivid Inexperienced, which includes tales of a burned-down constructing, a years-long battle with the state of New Mexico, a chapter case, and an indignant former CEO who’s accusing the corporate of fraud.

Vivid Inexperienced started buying and selling on the Nasdaq as a direct itemizing, not as an preliminary public providing (IPO) this previous summer time. The inventory shot up nearly instantly to $58, however it has since bought off and was recently promoting at $1.45.

Since that point, the inventory has slid as little as 35 cents. In November, the corporate reported monetary outcomes for the quarter ending Sept. 30, 2022, recording a internet lack of $25 million. It has an accrued deficit of $32 million.

It said in that submitting, “The corporate doesn’t have any brief or long-term contractual purchases with suppliers for future purchases, capital expenditure commitments that can’t be canceled with minimal charges, non-cancelable working leases, or any dedication or contingency that may hinder administration’s means to scale down operations and administration bills till funding is raised.”

DEA Deal?

The entire premise of this firm is that it’ll have a cope with the Drug Enforcement Company (DEA) to develop federally authorized hashish for analysis. That’s the way it satisfied the Nasdaq to record on the trade.

Probably the most Nasdaq would say about this itemizing is that the DEA language is what gave them consolation in agreeing to record an American plant-touching firm.

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Nevertheless, had the Nasdaq achieved its homework, it might have realized that whereas Vivid Inexperienced did have a memorandum of settlement with the DEA, that doesn’t really imply it has been permitted by the DEA. It nonetheless wants a certificates of registration from the DEA, which it doesn’t have.

It will additionally want a DEA-approved facility and a quota from the DEA. None of those exist.

$500 Million

Now the corporate is saying it will increase $500 million, which despatched the inventory larger. Vivid Inexperienced priced the shares at $39.99. Within the final 5 days, the inventory jumped from 52 cents to $1.30. That triggered the inventory jocks to pile on and a few inventory buying and selling websites to cowl the press launch, giving it credibility.

Nevertheless, anybody inside the hashish business is aware of how tight capital is for corporations really making income, a lot much less one with zero income. Take into account that LeafLink, which has processed greater than a billion {dollars} in transactions has solely raised $230 million. That’s a well-established firm with strong income.

As well as, the business is going through plunging hashish costs and states with a lot provide that the illicit market is stuffed with low cost hashish. Inexperienced Market Report lately wrote of ounces promoting for as little as $60 in some shops.

But Vivid Inexperienced says it will spend $300 million constructing a cultivation facility to pump out 5,000 kilos of hashish.

A superb deep dive into Vivid Inexperienced from Shane Pennington on a substack referred to as On Medicine additionally identified that there are already six corporations permitted by the DEA for analysis hashish. The analysis pool is small and sure well-supplied by the prevailing permitted cultivators. Why would they swap to an unproven supply?

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Pennington and his authorized cohort, Matt, additionally found one thing disturbing in a cease-and-desist order from the state of New Mexico’s Regulation and Licensing Division — Securities Division (web page 115 of the PDF bundle): a bombshell concerning John Stockwell. He’s the husband of the corporate’s majority shareholder, Lynn Stockwell. It states as follows:

John Okay. Stockwell has dedicated and/or is about to commit securities fraud in violation of NMSA 1978 58-13C-501

Brief Sellers

Vivid Inexperienced, which incorrectly describes itself as “one of many only a few corporations chosen by the U.S. authorities to develop, manufacture, and promote, legally below federal and state legal guidelines, hashish and cannabis-related merchandise for analysis, pharmaceutical purposes and affiliated export,” adopted up its inventory providing information with concern over brief promoting in its inventory.

“The integrity of our inventory is of the utmost significance to us and our shareholders,” mentioned Terry Rafih, govt chairman of Vivid Inexperienced. “With our latest EB-5 announcement, a variety of exercise ensued and, we are able to see an underperformance of our shares in comparison with the market, which is a transparent indication of the unlawful short-selling actions which have taken place and these actions have had a major impact on the worth of our inventory.

“We is not going to tolerate these unlawful actions that artificially depress the worth of our inventory and we’re dedicated to defending the pursuits of our shareholders and guaranteeing that the worth of their funding is just not artificially depressed.” he mentioned.

Maybe the corporate isn’t joyful that brief sellers could have thwarted the trouble to get unsuspecting buyers to half with their cash to purchase this inventory.

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