Innovative industrial properties indicate that it is too expensive

Thursday, Innovative Industrial Properties (IIPR) announced the issuance of approximately 1.3 million common shares to the public. However, the Company will still issue 195,000 additional shares as an option to the Underwriters. The shares will be issued at a common price of $ 126. The company plans to raise $ 163.8 million

Innovative Industrial Properties intends to use the funds of the offer to invest in real estate assets. The company provides real estate solutions to medical cannabis players. Real estate assets purchased in accordance with the offer will be used for cannabis related activities. The company will also use the general purpose supply funds.

How did the stock react?

Since the announcement, the stock has traded downward. Today, the stock has lost nearly 10% at the beginning of the session. Similarly, canopy growth was down 3.9% at about the same time. Horizons Marijuana Life Sciences ETF also lost approximately 1.9%. The weakness of HMMJ indicates declining confidence in the cannabis sector today.

Why did the stock fall?

To find out why stocks have fallen, investors need to understand the signal behind the new shares issued by Innovative Industrial Properties. Usually, a company issues its own shares to raise new capital on the public market. When stock prices are high, the company can obtain the most capital with as little dilution as possible. The market often considers issuing new shares as an indication that the company thinks it is too expensive.

Innovative industrial properties were already trading significantly higher in recent days. By issuing shares at $ 126, the company reports its own fair value measurement.

In the United States, there are many opportunities in the world of cannabis. Investors have poured their capital into innovative industrial properties in recent months. The company has grown by almost 50% during this period. Most industry peers in the industry have moved on.

Innovative Industrial Properties is not like other cannabis players. The company does not grow or produce cannabis related products. The company leases properties to cannabis players on the basis of a triple net lease. For more information, read Innovative Industrial Properties and Stellar Run.