Cellular Goods (LSE: CBX) shares have been very popular so far. The company listed on the UK stock market last week, joining other early-stage cannabis firms including Kanabo and MGC Pharmaceuticals that have come to market recently.
But after a successful Initial Public Offering (IPO), Cellular Goods shares have been falling. For now, I’m watching the stock and I reckon the hype around this company may be subsiding.
Here are five things I’d consider before buying Cellular Goods shares myself.
#1 – The cannabis market
The cannabis market is a fast-growing one. I should highlight that cannabinoids make up a group of compounds produced by the cannabis plant. In fact cannabidiol, or CBD, is a well-known cannabinoid that many people are familiar with.
I think the reason CBD has been gaining popularity is that it can be used to treat a wide range of conditions. According to the company’s website, it can calm the mind, aid sleep and improve mood. These are just a few benefits so I’m not surprised why CBD is gaining traction rapidly.
#2 – Synthetic CBD
I think what sets Cellular Goods apart from its competitors is that it’s focused on creating synthetic CBD products. In simple terms, it’s CBD that’s created in the lab rather than derived from the plant.
So what are the benefits of synthetic CBD? Well, each batch is identical and traceable. It’s free from pesticides and impurities. In a nutshell, synthetic CBD is claimed to be a cleaner and greener way to manufacture the substance.
I’m glad to see that Cellular Goods has jumped on the issue of sustainability from the start. This means that institutional investors could include the stock in their ESG (Environmental, Social and Corporate Governance) sustainable investing portfolios.
#3 – The products
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. The products will be sold on its website and through physical retail partnerships.
But do note that the company hasn’t actually sold any products yet! In fact, it expects to launch these in September. Cellular Goods could be successful, but for now it’s too speculative and risky for me. Its products haven’t been proven to sell to consumers. Therefore, it’s incurring costs and is loss-making.
#4 – High profile people
Also key, I feel, is that Peter Wall, the CEO of Argo Blockchain sits on the board as Non-Executive Chairman. It seems to me that he’s a bold advocator of early stage technologies and markets. Argo Blockchain shares have been in the limelight due to the recent rally in cryptocurrencies.
I can’t cover Cellular Goods without mentioning that sports star David Beckham owns a 5% stake. I guess it helps an IPO when there’s a high-profile investor involved.
#5 – Competitive market
CBD is increasingly popular right now, especially in the beauty industry. But this is a saturated market. High demand, along with Beckham’s high profile could work for Cellular Goods. Especially if he’s involved in the marketing campaigns. But I reckon, the company’s success will boil down to the quality of its products.
For now, I think Cellular Goods shares are a risky investment, but I’ll continue to monitor the stock.