Shares of FSD Pharma Inc. (Nasdaq and CSE: HUGE) surged as high as 50 per cent as the company exited the cannabis industry to develop its Covid-19 treatment.
In a statement Thursday, FSD Pharma said it’s surrendering Health Canada licences held by subsidiary FV Pharma and will liquidate all of its assets, including a medical cannabis production facility in Cobourg, Ontario.
CEO Raza Bokhari says the move maximizes shareholder value by allowing the company to focus solely on advancing its non-cannabis coronavirus treatment, as well as exploring other “compelling compounds” to expand its drug development pipeline.
The company’s 25,000 square-foot facility, a former Kraft Foods plant, was licensed to cultivate, process and sell medical weed.
In a May security filing, FSD Pharma first revealed its decision to pivot resources towards its pharmaceutical business and explore the sale of cannabis-related assets was made in March, which it said should be completed within 12 months.
According to the filing, the company is trying to sell $653,773 worth of inventory, as well as $11,660,307 worth of property, plant and equipment.
However, Auxly Cannabis (TSX-V: XLY) said last year it was terminating its partnership with FSD Pharma and its subsidiary partially due to “significant concerns” with certain aspects of the Cobourg facility’s infrastructure.
In March, FSD Pharma began a systematic scale back of cultivation operations at the facility in response to the Covid-19 outbreak, while putting workers on furlough.
— Betting Bruiser (@BettingBruiser) July 30, 2020
Despite Thursday’s rally of the company’s shares, some pot stock watchers questioned how long it would last.
“How are you going [to] develop a cure if you don’t have a place of business to operate out of,” tweeted industry tipster Betting Bruiser.
FSD Pharma stock cooled off in the last hours of trading on the Canadian Securities Exchange, closing up 12.5 per cent. Since an all-time-high as legalization began in October 2018, shares in the pharmaceutical R&D firm are down 95 per cent.
Top image via FSD Pharma