Unfortunately for North American licensed producer Sunniva Inc (CNSX:SNN), its July 10th spin-off announcement hasn’t had the desired effect on prices. The stock is on-track for a 12th losing session in thirteen, shedding almost one-third of its value during that time. In a period of extreme weakness for the cannabis sector, Sunniva’s decline has been particularly vicious.

#ACMPR LPs are down on average 13.6% this month (and 24.7% YTD). pic.twitter.com/uM9zS5QDCK — Alan Brochstein, CFA (@Invest420) July 26, 2018

That certainly wasn’t the game plan prior to announcing spin-out intentions just over two weeks ago. Generally, spin-off declarations are buoyant for stocks since individual assets get separated into distinct entities, where the market can better localize, recognize, and unlock asset values. The opaqueness between subsidiaries and operating structures is lifted. Throw in the fact that Sunniva intends to list both Canadian and U.S. assets on the Toronto Stock Exchange and the NASDAQ respectively, the hallmarks of a solid underlying catalyst was cemented.

And to top everything off, the cost to current shareholders is nothing. No assets were being siphoned out of the current structure that wouldn’t be reimbursed to existing shareholders should the spinout transaction take place. As per the release, shareholders would receive a proportionate number of shares in the new entity, and continue to hold a proportionate number of shares in the current CSE listed entity.

In other words, it was a zero-sum game for shareholders, where “undervalued” assets would become more visible and exchange upsizing enacted. There’s very little for investors not to like in this particular scenario.

But as often happens in raging bear markets, good news has been discarded in the dumpster fire that rages within.

Sunniva Inc. CEO Dr. Anthony Holler discusses his company’s plans to put the pedal to the metal in terms of developing their California strategy

As articulated earlier, Sunniva is well on-track for a 12th losing session in the past thirteen trading sessions. At today’s lows, the company had lost ↓32.91% in market capitalization since its July 9th close of $8.05/share. You’d also be hard-pressed to find any junior LP which has lost more value during that time.

None of this should be construed as a call-to-action. As Sunniva clearly states in the press release, the spinout transaction will require satisfying a number of conditions including shareholder approval, CSE approval and fulfilling the listing requirements of the TSX and NASDAQ exchanges—none of which can be assured. Fair enough. That’s a high bar to hurdle, and one that will take many weeks to fulfill.

But we find it curious that Sunniva has recognized zero effects from this clearly positive announcement. Perhaps investors have other reasons to punish the company beyond market norms; perhaps the bear market really is that indiscriminate. But don’t discount the underlying spin-off catalyst just yet—even if market recognition is premature.

Update

At the request of the IIROC, Sunniva announced early this afternoon that it is unaware of any material change in the company’s operations that would account for recent price weakness. The full press release can be found here.