Greenlane Holdings Inc. shares fell 10.5% Friday, after the maker of vapes and other accessories for the cannabis industry posted softer-than-expected earnings for the third quarter, hurt by the fallout from the serious lung disease tied to vaping that has caused illnesses in more than 2,000 Americans.
The Boca Raton, Fla.-based company GNLN, -2.30%, which went public in April, surprised with the news that its board has approved an up to $5 million share buyback program. While its stock has languished since the IPO along with the rest of the sector, companies are mostly hunkering down in the current environment and trying to conserve cash. The stock is currently trading at $3.48, almost 80% below its IPO price of $17.
“The stock is certainly cheap, or at a level that management thinks is cheap, and they are supposed to support the stock price too,” said Korey Bauer, portfolio manager at the Cannabis Growth Fund from Foothill Capital Management, who does not have a stock position in Greenlane. “But they are in a growth phase, so it’s tough.”
Share buybacks are a common practice by established companies aiming to prop up an ailing stock price. U.S. companies have been on a buyback rampage since the corporate tax cut of late 2018, disappointing hopes they would use the savings to invest in growth. That trend has helped companies offset a weak earnings season, as MarketWatch’s Chris Matthews reported this week.
Greenlane, which also sells rolling papers and pipes to retail businesses, posted a net loss of $6.398 million, or 64 cents a share, in the third quarter, wider than the $135,000 loss, or 67 cents a share, posted in the year-earlier period. The company’s adjusted net loss came to $7.5 million, after income of $20,000 in the year-earlier period. It didn’t provide an adjusted per-share loss.
In case you missed it: Greenlane IPO: 5 things to know about the closest thing to a U.S. cannabis company to go public on Nasdaq
Sales rose 3% to $44.9 million. The FactSet consensus based on five estimates was for a loss per share of 5 cents and sales of $49.3 million.
“Although we experienced some impact to sales of JUUL and other vaporization-related products related to regulatory uncertainty and the reports of acute liquid vaping-related health conditions, our core business remains strong, which going forward will be a larger focus of our strategy,” Chief Executive Aaron LoCascio said in a statement.
The Centers for Disease Control and Prevention has counted 2,051 Americans that have reported a lung disease that has been called evali (e-cigarette or vaping, product use associated lung injury), with 39 deaths reported as of Nov. 5.
Juul said Thursday it is halting U.S. sales of its best-selling mint-flavored e-cigarettes as it grapples with the lung disease outbreak and regulatory pressures relating, in particular, to its promotional activities toward teen and other young consumers.
The company said sales growth was also hurt by industry headwinds and a decision to move away from low-margin deals, including a $2.0 million decline related to vaporizers and vaporizer accessory products within the top six brands.
See also: Ex-Canopy CEO Bruce Linton joins U.S. cannabis company Vireo Health
Greenlane said it had $52.5 million in cash at quarter-end and debt of $8.2 million.
The stock has fallen 60% in the last three months, while the ETFMG Alternative Harvest ETF MJ, +3.51% has fallen 25% and the S&P 500 SPX, +0.05% has gained 5%.
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