Canaccord calls 3 Sixty Risk Solutions (SAFE.C) a speculative buy, but is anyone surprised?

The Globe and Mail reports that Canaccord has graded 3 Sixty Risk Solutions (SAFE.C) as a ”speculative buy.”

It’s true that the resulting volatility on the stock in its second day of existence saw its price jump 55%. It’s hard to deny that it’s early yet for 3 Sixty, as they’ve only been public for the better part of a few weeks. But their recent moves suggest that they’re the real deal, and there is a distinct probability that the attendant volatility that accompanies any new company to the market should ultimately stabilize.

“The recent combination of 3 Sixty Secure Corp. and Total Cannabis Security Solutions married a leading consultant in cannabis security with a provider of guard and secure transport services. The resulting entity has seen substantial growth as licensed producers grapple with the practical and regulatory requirements of securing and transporting large amounts of cannabis,” said Canaccord analyst Doug Taylor.

To assess the relative fairness of that statement we’ll need a markets 101 primer:

A speculative buy is any stock that carries a heavy risk-reward factor, like a penny stock or an emerging market stock. The draw for traders is the market volatility, which can mean opportunities for greater short-term returns with the offset being a higher probability that the investment will tank.

This tends to happen to new companies as the introduction to the markets causes their price to soar before ultimately crashing down to below their IPO value. The same is true of a reverse takeover, like 3 Sixty’s. It’s only after the price has stabilized that we really begin to see a company’s worth.  So it’s not that they’re a purely speculative play, or at least that they will remain that way, but that they haven’t had the opportunity to find their niche yet.

As a general rule, speculative stocks are not conducive to long-term investments unless they come as part of a mutual fund or exchange-traded fund.

Essentially, it’s a pretty fair statement for right now, but give it six months.

“The company’s operating and financial track record is limited at this point — this informs our speculative rating — but we see the opportunity for attractive shareholder returns as 3 Sixty’s growth trajectory is confirmed,” Taylor said.

Also, scaling will help their stability. They handle the logistics for weed and cash for their clients and are busy building out the supply chain for the cannabis market. If they prove out to be the biggest and the most badass, then it won’t be long before they’re a solid play.

The company highlights according to EquityGuru’s Chris Parry:

  • A board loaded with decades of security experience.
  • A distribution model that displays foresight and direction.
  • $17.5 million raised in RTO.
  • 143 million shares upon listing
  • Partnerships with big name players such as Tilray (TLRY.Q), Canopy Growth (WEED.T), Highland Park, and Aphria (APH.T) and Ontario’s provincial cannabis store, British Columbia’s Liquor Distribution Centre.

Those are some decent metrics for a company that’s only a month on the markets. If they continue on like this, then it won’t be long before the volatility calms down and 3 Sixty starts looking like something with growth potential.

3 Sixty combines privileged customer relationships (through its consulting business), customized vehicles, and a one-stop shop approach to cannabis security (vs. traditional security and logistics vendors). The company has already established relationships with most top Canadian players,” said Taylor.

Think of it like a rock entering a pool of water. The impact causes a wave, which rolls over the glossy surface, causing calamity. But after awhile, the stone sinks, and equilibrium returns.

Some companies go under while the best rise to the top. Only time will tell what happens to 3 Sixty, but if the above highlights are any indication, there’s a solid chance it’ll be floating before long.

–Joseph Morton

Full disclosure: 3 Sixty Secure is an Equity.Guru marketing client.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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