Shares in medicinal cannabis company Creso Pharma Ltd (ASX: CPH) are sliding deep into the red during morning trade on Wednesday, down 6.12% to 11.5 cents.
Investors were quick to dump their Creso holdings yesterday amid reporting from the Australian Financial Review that revealed the Australian Federal Police (AFP) had raided the Sydney offices of the company’s non-executive chair, Adam Blumenthal.
To be clear, the AFP was investigating the offices of Blumenthal’s investment boutique, EverBlu Capital, and not that of Creso Pharma.
Still, Creso finished the day 9% down yesterday at 12.5 cents. Here are the details.
What happened to Creso Pharma yesterday?
As covered by The Motley Fool yesterday, the AFP was investigating the offices of Creso’s non-executive chair to assist the Australian Securities and Investments Commission (ASIC) with an investigation.
This is relevant to Creso as EverBlu was involved with its bonus options issue last month. In a generous proposal, it offered shareholders 1 bonus option for every 3 shares held.
If exercised in total, this issue will see Creso raise around $100 million from the 25 cents/option payoff. It has $16 million in cash on the balance sheet at the time.
ASIC’s investigation could include trading and disclosure around Creso, alongside “flashy stock promoter” Tyson Scholz, according to the report.
As it stands, EverBlu received options in exchange for services instead of charging fees. This has sparked the interest of investigators.
Shares in the cannabis and psychedelics specialist stumbled 9% yesterday before freezing on the back of an ASX price query. The trading halt was in relation to price swings in Creso Pharma’s share price yesterday.
Creso Pharma shares ranged from as high as 14 cents to an intraday low of 11.5 cents.
Creso is unaware of any information concerning the company that has not been announced to the market that would explain the trading activity.
However, it did acknowledge the reports of the AFP executing a search warrant on its chair’s offices in Sydney. Creso also confirmed it was not embroiled in the investigation at all.
The selling pressure continues on the Creso Pharma share price at the time of writing.
Creso Pharma share price snapshot
The Creso Pharma share price has struggled this year to date after posting a loss of 36%. Despite this, Creso Pharma shares have soared over 259% in the last 12 months. That’s 245% ahead of the benchmark S&P/ASX 200 Index (ASX: XJO) return in the same time.