Cellular Goods (LSE: CBX) shares listed last Friday on the London Stock Exchange through an initial public offering (IPO). It joins cannabis companies such as Kanabo and MXC Pharmaceuticals that have come to market recently.
Normally I don’t consider IPOs as there’s limited information to make an informed investment decision. But I couldn’t resist looking at this one. So here’s my take on the stock.
What does Cellular Goods do?
In a nutshell, Cellular Goods sells cannabis-related products to consumers. In fact, it’s focused on creating synthetic CBD products. This means that the CBD is created in the lab rather than extracted from the cannabis plant. CDB has been used to treat a wide range of conditions. Inflammation, pain relief, anxiety, depression and insomnia are just a few of them.
I think there are a few things that sets Cellular Goods apart from the other cannabis companies that have come to market of late. Firstly, this is London’s first listed ‘pureplay’ consumer CBD company.
Unlike its peers, Cellular Goods makes no medical claims on its products. In the long term I reckon this may hinder the company in the face of future competitors as there’s no intellectual property. Like many consumers, I’d rather buy products that are backed and supported by proven medical science.
So what are the products?
I should stress that Cellular Goods, at present, hasn’t sold any products. The company is therefore pre-revenue and loss-making. The products are due to launch later this year. According to the website, they’ll be available in September 2021. To me this would be a risky investment as the company’s CBD products haven’t been proven to sell yet.
Cellular Goods is focusing on two product lines. The first being high-end skincare and the second is athletic recovery products. It’s launching with three synthetic CBD products: a face mask, a daily skin serum and a topical sports recovery gel that will be applied via a touch-free roll-on applicator.
The products will be sold direct-to-consumer through the Cellular Good’s website and through physical retail partnerships.
Significant shareholders
The footballer-turned-global celebrity David Beckham owns 5% of Cellular Goods through his DB Ventures firm. I reckon this is one reason why the IPO has received a lot of attention.
The fact the company is associated with the current buzz ingredient, CBD, has probably also helped. But my opinion of the stock won’t be swayed by a high-profile celebrity who has been an early-stage investor.
Cellular Goods shares: would I buy?
Cellular Goods could be successful, but it’s too speculative and risky for me. Its products haven’t been proven to sell to consumers yet. Therefore it’s incurring costs and has no profit.
That said, CBD is in demand right now, especially in the beauty industry. This, combined with the Beckham link, and the possibly-savvy decision to launch a sports-linked product, could be a winner for Cellular Goods. I guess time will tell. But I think there’s a lot of hype around the company and I’m waiting for this euphoria to subside.
I would like to see the company deliver trading updates and results as a public company. That way, I have more information to make an informed investment decision on. So for now, I’m sitting on the fence and monitoring Cellular Goods shares.