It certainly has been an eventful week for the Cann Group Ltd (ASX: CAN) share price.
The cannabis company's shares were on a high on Tuesday when it announced an agreement to purchase a site located within the Mildura region for $10.75 million.
This site will be used to construct a state-of-the-art greenhouse on the site for large scale cultivation and production of medicinal cannabis to service both domestic and export markets.
Its shares were quick to run out of puff, though, and profit taking led to its shares giving back a lot of Tuesday's gains with a heavy fall on Wednesday.
This morning the Cann share price is lighting up the market again and is up 7.5% to $2.16 at the time of writing following the release of an investor presentation.
Should you buy shares?
Cann's new state-of-the-art greenhouse is expected to be fully commissioned in the third quarter of calendar year 2020 and have a production capacity of up to 50,000 kilograms of dry flower per annum.
This will be a sizeable increase in its production capacity, but it will come at a significant cost. Management estimates that the construction cost will be $130 million and be funded with a mix of debt and equity.
Ultimately, though, management expects it to be worth the investment. It has forecast annual revenues of approximately $160 million to $200 million when its expanded production facilities are fully operational. This estimate is based on the current wholesale price of cannabis dry flower.
If it achieves this then Cann could prove the doubters wrong and become a good investment, but for now I would suggest investors stay clear of its shares and restrict them to a watchlist along with Althea Group Holdings Ltd (ASX: AGH) and AusCann Group Holdings Ltd (ASX: AC8).
Given the significant cost of its new greenhouse, I suspect that another capital raising may be necessary in the near term. This could weigh on its shares if it occurs.
