Why Would a Bev/Al Stock Go Public at $9, Trade at 39 Cents 5 Months Later?

Amass Brands Inc., whose portfolio includes alcoholic, non-alcoholic and functional beverages, reported prelinary third quarter net revenue of $5.3 million, up 30% from a year earlier,

This sounds fabulous, and it gets better:

Pizzolato remained the No. 1 organic sparkling wine in the U.S. across every measured period, with nearly 29% dollar share, the company said. Dollar sales grew 33% in the latest four weeks, compared with 3.6% for the organic sparkling wine category, and the brand’s 187mL minis grew between 26% and 39% across every measured period, according to NielsenIQ retail scan data, Total U.S. xAOC + Liquor Open State + Convenience.

Good Twin Non-Alcoholic Wine retail dollar sales grew approximately 144% year-over-year in the latest four weeks, about eight times the growth rate of the U.S. non-alcoholic wine category and the fastest velocity growth among established brands in the category’s top 15.

Sales per point of distribution rose approximately 78%, the largest gain in the top 15, and Good Twin ranks #3 in that group by sales rate per store, the company said. Dollar sales grew 123% over the latest 13 weeks and 109% over the latest 26 weeks.

This sounds like a fabulous story.

But I wouldn't buy the stock. The stock trades on NASDAQ and closed Tuesday at 38.6 cents a share. It went public on May 20 at $17 a share. That plunge to 38.6 cents a share from $17 should be a red flag.

But here's the real red flag: None of the proceeds from the initial public offering went to the company; instead the proceeds went to existing shareholders.

To be sure, the mere fact all the proceeds went to existing shareholders and none to the company isn't necessarily a red flag. The shareholders might have wanted to capture their $8 a share gain. But that doesn't explain why a stock that went public at $9 a share, rose to $17 is now trading for 38.6 cents a share. If the company is as good as its release suggests, the stocl shold at least be trading for $9, the original offering price.

We'll look into this a bit more and let you know what we find.

Back to the Sales Release

Amass Electrolytes expanded to six key U.S. markets – Southern Glazer’s Wine & Spirits (California), Great Lakes Wine & Spirits (Michigan), Prime (Georgia), Vinejoy and Marketplace (Illinois), Manhattan Distributors (New York) and Empire Distributors (Colorado) – since its launch in May.

"Our preliminary third quarter results demonstrate what we believe AMASS can become. Our strategy has always been focused on building a portfolio concentrated around categories where consumer demand is growing, where we believe we can create category leaders, and where our existing platform gives us an advantage," said Mark Thomas Lynn, Founder/CEO of AMASS.

“During the quarter, continued execution of that strategy resulted in 30% revenue growth, Core Brand growth of 67%, and results that materially exceeded the guidance we introduced as a public company. Against a broader beverage industry backdrop of muted growth, we believe this performance speaks to the strength of the portfolio we’re building and the opportunity ahead," he said, adding:

"Perhaps most importantly, the growth is coming from exactly where we want it to come from. Good Twin continues to significantly outpace its category, Pizzolato remains the leading organic sparkling wine in the United States, and AMASS Electrolytes has expanded into six key markets just months after launch. We believe these results provide further evidence that our strategy is working as intended and that AMASS is becoming a more focused, higher-quality and increasingly scalable beverage platform."

The company said these are preliminary, unaudited results. It expects to report full fiscal third quarter results after the market closes Nov. 16.