A New Name for Marijuana Investors to Consider
With the marijuana “gold rush” underway, a new pot stock has started trading on the Nasdaq.
I’m talking about Akerna Corp. (NASDAQ:KERN), a cannabis regulatory compliance technology company headquartered in Denver, Colorado.
Compared to most of the well-known pot stocks, Akerna’s business is quite different. The company doesn’t produce or sell any pot. Instead, it offers a central data management system to pot companies and governments. Through this system, the company’s clients can track regulated cannabis products from the seed stage to the eventual sale to consumers.
Now, I should point out that Akerna did not list its shares on Nasdaq through an initial public offering (IPO). Instead, the company was created through the merger of MTech Acquisition Corp., a blank check company that began trading on the Nasdaq in February 2018, and MJ Freeway LLC, the company behind the software business.
On June 17, MTech Acquisitions and MJ Freeway announced that the merger was completed and that the newly formed Akerna would start trading on the Nasdaq on June 18.
Jessica Billingsley, co-founder and CEO of MJ Freeway, now serves as the CEO of Akerna. Notably, the company also has Roger McNamee serving as a senior advisor to its board of directors. McNamee was one of the early investors in Facebook, Inc. (NASDAQ:FB).
“Cannabis companies that want to be leaders are adopting MJ Platform, because it is the only ERP product with the technical foundation to support multi-line and multi-location operations,” said McNamee. (Source: “MTech Acquisition Corp. Completes Merger With MJ Freeway LLC to Form Akerna Corp.,” GlobeNewswire, June 17, 2019.)
“This transaction will enable MJ to better support customers manage high growth and complexity as the industry transitions from local to global scale.”
The company enjoyed a great first day of trading. On June 18, KERN stock climbed 28% to $15.35 per share.
And that was just a start, as the momentum grew even stronger in the next trading session. On June 19, Akerna stock skyrocketed to $49.80 apiece, marking a staggering gain of 224.4%.
Given that the stock’s predecessor MTech Acquisitions closed at $11.99 on June 17, its last day of trading, Akerna stock has already surged 315.3% in just two days of trading.
Akerna Corp. (NASDAQ:KERN) Stock Chart
Chart Courtesy of StockCharts.com
Akerna Corp. Financials
Of course, pot stock investing is not exactly risk-free. So before taking out your wallet, let’s take a look at the company’s financials.
Akerna is yet to report earnings as publicly listed company. But from an earlier filing to the U.S. Securities and Exchange Commission (SEC), we can get some insights about the financial aspects of its business.
Note that, at the time of this filing in May, the merger that created Akerna had not been completed yet, so the technology software company was operating under the name MJ Freeway LLC.
According to the filing, MJ Freeway has grown its revenue every year since its inception. In its first full fiscal year of operations (ended December 31, 2010), the company earned $800,000 of revenue. (Source: “Amendment No. 4 to Form S-4 Registration Statement Under the Securities Act of 1933,” U.S. Securities and Exchange Commission, May 14, 2019.)
By the fiscal year that ended June 30, 2018, MJ Freeway’s revenue had grown to $10.5 million, marking a total increase of almost 1,213%. Revenue growth in the most recent fiscal year was driven by the winning of government contracts with Washington and Pennsylvania.
The company generates revenue from three main segments: commercial software, consulting services, and government regulatory software.
Despite its strong top-line growth, MJ Freeway had yet to turn a profit. In the fiscal year that ended June 30, 2018, the company incurred a net loss of $2.5 million, or $0.30 per share.
Going forward, Akerna plans to make strategic acquisitions to further grow its business.
At the end of the day, keep in mind that Akerna is the first compliance technology company in the marijuana industry to trade on the Nasdaq.
And while it’s a very new name to stock market investors, the company has been around for quite a while. Over the past nine-and-a-half years of operation, it has tracked over $15.0 billion in pot sales.
Today, Akerna has a well-established market position. The company has clients in 29 of the 33 U.S. states that have some form of legal marijuana. At the same time, Akerna has expanded its presence globally, serving clients from Canada, Australia, New Zealand, Spain, Switzerland, Denmark, Chile, Columbia, Uruguay, and South Africa.
If investor enthusiasm remains strong toward the legal cannabis industry, it could send this unique technology pot stock to new highs.