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Elixinol share price slumps 6% after sale of Japanese cannabis arm

The Elixinol Global Ltd (ASX: EXL) share price has fallen 6.31% lower this morning after the Aussie cannabis group sold its Japanese operations yesterday. 

What did Elixinol announce yesterday?

In an after-market update, Elixinol confirmed the sale of its 50.5% stake in Elixinol Japan to another major shareholder.

The Elixinol share price has plummeted in early trade, given the sale’s net profit impact is an expected $2.2 million loss.

The Aussie cannabis group has sold its stake to Mr Takeshi Sakurada for consideration of JPY 1 million cash (A$13,500 on a converted basis).

The sale also includes a deferred cash payment of A$362,715 multiplied by a ratio of the 8 January 2020 closing price divided by $1.09 (less Japanese taxes). 

There is also an obligation on Elixinol Global and Elixinol Japan to engage in good faith negotiations to enter into a licence agreement by 31 March 2020.

Terms of the deal include the following:

  • Non-exclusive licence in Elixinol Global’s tradeworks and know-how to allow Elixinol Japan to continue operating,
  • Elixinol Japan to pay royalties equal to 3% of its gross sales, and
  • an indefinite term, subject to mutual agreement on termination.

How has the Elixinol share price performed this year?

It’s been a tough year for ASX cannabis stocks and the performance of the Elixinol share price reflects that.

The group’s shares are down a whopping 64.31% since the start of January to just $0.96 per share. The Elixinol market cap has fallen to $133.07 million on the back of this year’s slump.

However, Elixinol hasn’t been the only cannabis stock to be hit hard by softening earnings and investor hesitation.

Creso Pharma Ltd (ASX: CPH) shares fell 30% on Monday to $0.14 per share while THC Global Group Ltd (ASX: THC) shares are down 21.28% this year.

The Cann Global Ltd (ASX: CGB) share price has nearly halved since the start of the year and opened at $0.016 per share this morning.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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