Liberty Health Sciences White Hot As U.S. Cannabis Operator Surge Continues

Benjamin A. Smith

Liberty Health Sciences Inc (CSE:LHS) (OTCQX:LHSIF)—along with the rest of the mid-major cannabis market—remains on quite the hot streak. The primary Florida-based vertical cannabis operator has blasted off to triple-digit gains since August 15th, and has been particularly impressive lately. We take a closer look.

While Liberty Health Sciences had been appreciating steadily since Canopy Growth Corp.’s catalyzing August 15th announcement, the fun really began last Thursday. It was then Aphria Inc. announced a complete divestiture of all U.S. cannabis assets with sale of remaining interest in Liberty Health Sciences. As part of the divestiture agreement, the buyers of 64,118,462 LHS shares agreed to give Aphria a five-year promissory note exchange due September 6, 2023 bearing annual interest of 12%, in the amount of $59,097,986. When that principle is compounded out, Aphria will receive back $104,150,844 (principle and interest), if it does not re-acquire the shares. That gave LHS an implied value of $1.624/share.

In conjunction with the aforementioned news, LHS delivered a healthy growth forecast the same day. While still devoid of positive net income, the company increased sales revenue by 95% in the three-month period ended August 31, 2018. Corresponding patient count increased to almost 10,000 patients, from 4,600 at the end of May. This represented a 112% increase quarter-over-quarter. Like most of operators at the state level, business is booming.

In response these dual catalysts, Liberty Health Sciences catapulted higher and hasn’t looked back since. In fact, the majority of LHS gains during the current run—about ↑41.93% of the ↑76.71% aggregate move off the August 14th low—has been realized since the September 6th trading session. Further price extension has been aided with news that LHS signed an agreement to become the first Florida-based brand partner for the PAX Era vaporizers, among the more popular on the marketplace.

LHS CEO George Scorsis discusses the company’s Florida dispensary 3,000 patient/week growth rate and the current/future U.S. regulatory environment

While everything non-Canopy related continues to soar, LHS has taken advantage by making a definitive thrust through $1.00/share. This delineation point acted as both resistance in April/June, and a key psychological barrier for the company to work through. With that level in the rear view mirror, LHS has perhaps permanently seen the last of its penny-stock trading days.

Midas Letter will continue to cover the Liberty Health Sciences story as further events warrant.

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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