Chill Brands (LON: CHLL) (OTCQB: CHBRF) shares are up another 20% Thursday as the company zooms on the success of its recent capital raise. We would normally think that more shares in issue will mean a lower price for each of them but if that were always true then there would never be a successful capital raise. So, it does depend upon what price the capital is raised at and also the uses to which it is going to be put.
Chill Brands markets varied cannabidiol, or CBD, smokes and chewables and so on. This is very much one of the fashions of the moment. Or rather, it has been a fashion for some years along with the legalization of cannabis itself in many jurisdictions. Almost without fail all the market entrants into the cannabis market have been losing money hand over fist. The base problem being that there are many such entrants all backed with lots of capital. Competition is therefore fierce and margins pretty much non-existent. It does not help that the previous, illegal, supply chain still exists and is unencumbered by regulation or taxation.
The CBD market, well, the jury's still out on that one. We simply do not know how it is going to turn out. Will it be a passing fad as with so many others that have gone before? Or will it become just a regular part of life for decade after decade? Either way the value will be in the brand. CBD's not difficult to process, it is cheap enough, so it is the creation and maintenance of a brand that matters. For that is all that will create continued decent margins.
Chill Brands share price from London Stock Exchange
Recently Chill Brands was able to raise more capital: “Chill Brands, the international consumer packaged goods company, is pleased to announce that it has raised £2.6 million (before expenses) from a high net worth investor (the "Fundraise").” That was at about the market price at the time which was pretty good going to be honest. They have also got suppliers willing to accept shares in return for invoices - a pretty good sign as it means people would seem to prefer shares to actual cash: “The New Shares have been issued to a service provider in settlement of an invoice for investor relations and connected services.”
Having sorted out the past bills due, gained access to capital, the big question now for Chill Brands is how well they are able to sell those CBD treats. That, in turn, will depend upon their skill at - and budget for - branding. It is by no means a sure thing that they will succeed but it is at least now possible to think they can have a darn good try at it.