Sproutly Inc. Jumps Past Implied Post-RTO Price On Strong Volume

Benjamin A. Smith

Sproutly Inc. came firing out of the gate today on strong volume. The cannabis LP and extraction specialist soared well past $1.00/share in early trade, before grinding down to session lows by day’s end. Nevertheless, we recap the successful day that was.

To briefly summarize how Sproutly’s capital structure came to be, the company was formed via reverse takeover (RTO) with Stone Ridge Exploration Corp. in February. Both parties previously applied for listing of the resulting issuer’s common shares on the Canadian Securities Exchange, which opened today. Under terms of the transaction, one (1) outstanding common share of Sproutly was exchanged for two (2) common shares of the issuer. Today, the combined entity faced the investment community to see where it stood.

Because of the RTO structure of the listing, there was no minimum offering price as commonly seen in organic IPO transactions. With Stone Ridge agreeing to a 2-for-1 swap of common share equity, the new company had an unofficial implied IPO price of roughly $0.60/share, based on the company’s last list price of $0.30/share prior to February’s stock halt.

Within the first 10 minutes, Sproutly sprinted from an opening print of $0.75/share to its daily high of $1.18/share. Almost twenty percent of the day’s volume occurred during this time period, powered by legions of on-open market orders. Given the brisk opening half hour of trade—where almost half of the day’s trading volume took place—buzz surrounding Sproutly APP technology appeared to have resonated with investors.

In the end however, profit takers gradually seized control. After hanging around near the $1.00 level into the early afternoon, price dipped in control fashion into the close, ultimately finishing at $0.82/share. That equates to a 36.66% implied post-RTO listing gain.

While it perhaps wasn’t the start-to-finish effort the company had hoped for, in this challenging small cap cannabis environment, it was undoubtedly a winning effort. Investors may look towards $0.75/share as the most obvious near term support area (opening day low), followed by $0.60/share (RTO common swap)—should it come to that.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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