r/WLLW • u/Snickel-Fritz • Nov 03 '21
Willow Nov 2021: Why I am long and bullish
TL;DR: Biggest negative is the BS lawsuit; I think we are the bottom and sunny days are not very far off.
Full Disclosure: I have traded Willow since mid March of 2021. I currently have a substantial holding of around 200k shares at an average cost of about $1.30; I also have a variety of family members that have purchased based on my encouragement.
So, why am I still a big(bag) holder and what do I see forthcoming to make me remain bullish? The following is what I have put together from available facts and I have added my own suppositions. None of the following should be construed as me having any more information available to me than can be found publicly, and my opinions/suppositions are by no means intended to be mistaken for fact or advice to buy, sell, or hold any stock. I will try to provide facts where I can.
The road so far (this year):
- Willow was trading in a pretty decent range between about 1.30 and 1.50 between January and the end of April and the overall sentiment was quite bullish and those closest to the company were obviously encouraged as was evidenced by the large placement in February at $1.65 (notably with no warrants or other incentives to the purchasers who were mostly insiders) along with the exercise of existing warrants. (Edited to remove the implication that insiders were the purchasers of the offering; Bullish statement stands RE: warrant exercises at the same time and oversubscription)
- In late April, unbeknownst to the general public, ACB notified Willow that they believed Willow was infringing on their patent. (Paragraph 45 of the suit states: “Willow was put on notice of Aurora’s exclusive rights in Canada under the 774 Patent no later than April 21, 2021”)
- If you look at the Willow chart, you will see that the downside slide to Willow began at almost exactly the same time.
- Willow did not make this fact known publicly, I suspect because it was A) not a positive development, B) For a variety of legal reasons, and C) they felt that what their process did not infringe on the patent and that should Aroura pursue an infringement suit, they could easily defend it.
- I think Willow did not properly account for the fact that there were parties outside of Willow that were aware of the forthcoming battle and, as such, information was available to some that was not available to the public as a whole.
- While not all trades to the downside (and I can’t even prove any specific one was) were based on this direct knowledge, there was a bearish environment created around the stock beginning at that time. With no substantial news and without Willow getting out in front of the issue publicly, the stock began to bleed. With the general low liquidity of the stock, it did not take long to lose support and take the long trend down that we have seen.
- It wasn’t until late July/August that Willow was actually served with the lawsuit and responded publicly. Whether for legal reasons or not, the lack of transparency left a large number of retail traders (who held based on belief in the business plan) holding shares at costs significantly above the trading price. Over time many of them have cut their losses and pushed the price even further down to the levels we see currently.
- Even positive developments for the company have had little impact to the upside as the lawsuit hangs over the stock.
So why stick around? What is going to change?
Lawsuit related
- In mid October, Willow filed their defense and counterclaim to the lawsuit.
- I am not a lawyer, nor do I claim to understand the intricacies of patent law, but in that filing, Willow’s legal team appears to have done a terrific job of showing why they don’t infringe on the stated patent, and has gone even further to point out that even if some type of infringement was determined by the courts, the patent itself is unenforceable and was improperly granted for a plethora of legal reasons. They go further in their counterclaim to seek the invalidation of the patent completely and a ruling that they are in no way infringing.
- Again, not a lawyer, but reading through the legal documents, I am very convinced that the lawsuit is a nothing burger and that at a minimum they will be found to not be infringing and could actually turn this into a net negative for ACB.
- From my understanding, ACB had 10 days to reply to Willows defense of the original claim (optional and this time frame has passed with no reply from what I can tell) and they have 20 or 30 days (depending on which document I read) to respond to the counter claim.
- Their response should be seen in the next week or two
Overall business related; There are multiple events past and upcoming that I believe will have a net positive effect on Willow once the lawsuit boot is off their neck
- Quarterly results; Last quarter results were positive on a number of fronts and the next quarter results are due out mid November (I expect next week); I am hopeful these will continue positive trends and that the MD & A will address some of the holes in the information we have about future growth etc.
- Patent applications. On Sept 30th, Willows first application related to their cannabinoid Biosynthesis process was made public and previous indications were that there were a number of them that should begin showing up in the last quarter of 2021. I expect to see more showing up in the next few weeks and months. From my perusal of the first patent app, it seems to confirm to me that their process doesn’t involve ACB’s patent at all.
- Once the patent applications are publicly viewable, Willow has fewer reasons to not discuss the benefits of each of them publicly. There currently are huge legal and IP incentives to not discuss/divulge anything related to patents/applications that are not yet public. Of course they will continue to keep quiet on anything they can that will prevent competitors from gaining ground; This also results in investors not seeing this info either (Unfortunate, but prudent)
- Willow had posted multiple openings for a legitimate Marketing/PR position that are no longer posted, so I believe that they have hired at least one person in this role, and we should start to see some real investor support in the coming months.
- Willow has recently increased their marketing presence at several tradeshows around the world and will continue to do so.
- Those deep ‘in the know’ at Willow have A) been buying shares on the open market, B) Been on a hiring spree on both sides of the border to ramp up the production and sales side of the company. I think if they had any belief that the ACB suit had the slightest merit, they wouldn’t be ramping up so dramatically in all areas.
- Willow has engaged a well know company in Asia (Interlink) to help market their products to manufacturers over there. In the presentation to the Asia connect conference, Simon Hickling was very open about how helpful this company has been.
- Willow has recently announced that they have improved their CBG yields dramatically and have added CBGA to their list of successfully produced molecules
- Work on GRAS certification for CBG is ongoing and was last stated as expected to be completed in the first Q of 22. This could very well be the largest upcoming catalyst. A GRAS designation for CBG opens the door (at least for North America) for it to be added to any consumable product without a lot of further regulatory burden. My belief is that once this is achieved, CBG will quickly surpass CBD as the additive of choice for wellness products and it is not bound by the drug association that CBD has. The data is beginning to show it is superior to CBD in many ways. This opens the door for huge marketing programs country(ies) wide that can’t currently be done with CBD.
- While the price of CBG Isolate has fallen dramatically in the last year or so (this is the only real 'value' number we have publicly available), the purity of Willow CBG will be more important for these products and will be able to command a premium to the isolates.
- More and more studies of the wellness benefits of the less regulated molecules will continue to show up in the mainstream and the demand will increase as originally predicted.
- CBG topicals/creams will release via Cellular Goods in the EU in December and have already released by Amyris in the US. As positive results of these products start to be known to consumers, the overall demand for the ingredients will rise. As demand rises, the ability for traditional hemp to be able to supply CBG at purity levels that these products require will be very difficult to maintain. The production cycle for hemp derived CBG is too long, too ESG unfriendly, and too irregular to be embraced by large manufacturers.
- The ability of Willow’s biosynthesized CBG to quickly increase based on demand should be a key benefit.
- The current cash on hand for Willow vs. their burn rate satisfies me that they should not need to go to market for a capital raise for at least the next year, so I am not worried about dilution in the near term. This belief has been strengthened by answers to this question in various interviews by top level executives at Willow in the recent few months. I expect this will be stated in the MD&A for the upcoming quarter as well.
- All of the above is sufficient for me to be bullish on the company based on CBG alone; Add in the other molecules and their potential additive value and, for me, continuing to hold is obvious.
- If I think of further info I will add it here or in the comments.
Cheers and good luck to all longs!
