What happened
Shares of Bright Green (NASDAQ:BGXX) were up by more than 15% as of late Monday afternoon after the company said it had received approval from the U.S. Drug Enforcement Agency (DEA) to be the first publicly traded cannabis company to grow and sell cannabis-related products for research, pharmaceutical applications, and connected import and export at the federal level. The stock is up more than 255% this year.
So what
Bright Green began trading on the Nasdaq last May through a direct offering. The company's model differs from state-licensed cannabis companies that sell commercially to consumers, which are only allowed to sell in certain states but not at the federal level. It's important to note there are other federally approved cannabis sellers for research purposes, but they are not publicly traded.
On Monday, management said its registration with the DEA, which was approved after the agency made a final inspection on March 22 at the company's agricultural complex in Grants, New Mexico, will enable Bright Green to immediately begin cultivating and selling marijuana, and it plans to raise $500 million in capital.
Now what
There are a few red flags investors need to be aware of regarding Bright Green. In the fourth quarter, the company had no revenue. It reported a loss of $27.7 million in the quarter and its cash position was only $414,574.
The company is also being sued by John Fikany, saying he was not paid while he was CEO of the company. In his lawsuit, he said the company was "a sham, operated illegally and fraudulently." The company has also faced shareholder lawsuits.
In February, Bright Green responded with a statement that Fikany had never been CEO and wasn't ever offered the role. It added that the company is fully compliant with the Nasdaq and the Securities and Exchange Commission.
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Jim Halley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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