What’s up with Tree of Knowledge, the high-flying cannabis company, suspended only months after crosslisting in Jamaica? And have the operations totally gone up in smoke?

Back in October, the Jamaica Stock Exchange announced its decision to suspend the shares of Canada-based Tree of Knowledge International Corporation. 

The JSE admitted Tree of Knowledge as a crosslisted company in April under the ticker TOKI. Its shares are also listed on the Canadian Securities Exchange. The company describes itself as a leader in pain management, conducting research and developing CBD- based products to help ease pain.

Despite its listing, you probably haven’t heard of Tree of Knowledge and that’s because it doesn’t have retail operations in Jamaica, and also the stock has never traded on the JSE, according to our analysis of official data. In fact, before it was suspended, several potential investors queued up to buy shares, but there were no sellers.

The JSE suspended the company after it failed to file its June second-quarter financials.  According to the JSE’s rules, “companies with quarterly financial statements which are 45 days overdue will have trading in their shares suspended until the reports are submitted to the JSE'”.

Tree of Knowledge eventually posted its second quarter results on its website, but those results are still not posted locally. The company made US$3.7 million in revenue between April and June. That’s nearly three times more than a year ago. But it also lost US$3 million, compared to $1 million net loss last year. 

The JSE also noted that Tree of Knowledge failed to provide timely disclosure about its management and board changes since listing on the JSE, as well as the current makeup of its audit committee.

Some people may have been surprised by the company’s suspension, but the JSE has rules about timely disclosures and compliance. 

This is what we saw happen with Tree of Knowledge. Companies listed on the JSE have at least 45 days after the end of every financial quarter to file their financial statements. 

The company’s second-quarter report was due in mid-August. However, they said that they would be taking advantage of extensions granted by the Canadian authorities in response to the COVID-19 pandemic.

TOKI then announced that it intended to file the report by October 13, but it also missed that deadline, so they were suspended from the JSE on October 16, even though their financials were uploaded to their website the day before.  In its statement, the JSE mentioned that there were several correspondence and telephone conversations about the filing of its financials and other changes.

The onset of the pandemic did cause many public companies to delay the release of their financials. Canada, like most other countries, enacted shut down measures to contain the spread of the virus, so the distribution of TOKI’s cannabis products was likely halted, especially after Canada closed its borders with the US.  The shutdown also likely impacted sales. Whatever the reason, the JSE felt it necessary to protect potential shareholders and the wider market.  Up to mid November, shares in the company under the TOKI ticker remain suspended, despite the release of the financials on the Canada exchange. 

Tree of Knowledge isn’t the first company suspended from the JSE. In some instances, suspension has pushed companies to improve. For instance, Pulse Investments shares were temporarily delisted in 2001 and also suspended in 2015 due to late filing. But Pulse reorganised and has been a market leader in subsequent years.  Check out this video I did on Pulse recently.

The JSE will not hesitate to suspend or delist companies from the stock exchange, in order to improve transparency. The Jamaica Stock Exchange deals with over 100 companies which are worth over $1.5 trillion combined; therefore, it needs to be aware of what’s going on with each company to ensure that they continue to meet the stock exchange’s standard.

The JSE rules are publicly available online for anyone to review. Additionally listed companies are given a rule book at their listing ceremony.    

So what do you think about Tree of Knowledge and cannabis stocks in general?  Good investment or still too risky? Let me know in the comments.

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Categories: MoneyMondaysJA