The Creso Pharma Ltd (ASX: CPH) share price has finally emerged from its voluntary suspension after almost a week out of action.
The initial reaction to its return was extremely positive and its shares rallied over 12% higher to $1.51. But shortly afterwards its shares were over 16% lower to $1.12. All in all, there was an incredible 28% intraday swing in its share price today.
What happened?
The initial positive reaction appears to be related to its significantly oversubscribed placement to raise $17.5 million and new partnership with Swiss chocolate company Aeschbach Chocolatier.
In order to accommodate the high demand from institutional, sophisticated, and professional investors both domestically and internationally, Creso Pharma expanded the placement from $10 million to $15.5 million at an issue price of $1.10 a share. The remaining $2 million will be raised through a share purchase plan.
These proceeds will be used for various reasons and include pursuing further growth opportunities in the hemp edible space.
The company has entered into the fast-growing edibles market with a range of unique, ultra-premium Swiss-made terpene infused chocolate products with innovative proprietary recipes.
According to the release, Creso has partnered with a highly reputable Swiss chocolate company, Aeschbach Chocolatier, to develop these premium chocolates for global distribution.
Terpenes are essential oils found in plants that carry flavour and aroma. They will the characteristic odour and fragrance of cannabis with the same taste and feel but will not contain THC or CBD or any other cannabinoids.
Whilst it isn't necessarily something that interests me, there certainly is a market for it. According to the release, over $180 million worth of marijuana infused food and drinks was consumed in California alone last year.
So why are its shares lower by 16%?
As well as the potential dilution from the placement, today's decline appears to be related to confusion over the company's expansion into China. As we mentioned here, the company recently announced an agreement with a subsidiary of Hong Kong-listed Kingdom Group. This was later refuted by Kingdom Group, which stated that Kingdom Creative was not a subsidiary.
But Creso has attempted to clear up this confusion today, advising that the agreement with Kingdom Creative was brokered by Mr Ren Weiming, who is a major shareholder of both Kingdom Creative and Kingdom Holdings, making them associated companies and related parties.
With so much going on, Creso will certainly be one to watch in 2018.
