Penny stock Nutritional Holdings has turned to selling an unregulated cryptocurrency, through a private company, to raise money to expand its fledgling cannabis business.
The listed company, with a market capitalisation of R167m, sells dry food to schools, hostels, mines and prisons. But after struggling to turn a profit for four years, Nutritional Holdings has expanded into selling cannabis oils and supplements, which it says boost the immune system.
Cannabis is the non-psychoactive part of the marijuana plant that consumers believe possesses health properties.
With Nutritional Holdings shares selling for 1c, and debt of R18m in shareholder loans, it struggled to raise affordable finance to expand its cannabis business, run by its subsidiary Ukusekela. So Nutritional Holdings developed a cryptocurrency called cannacrypt.
Cryptocurrencies are digital assets that act as a medium of exchange that is not issued by a single authority such as a central bank.
Nutritional Holdings wrote to shareholders in March and said it was selling the cryptocurrency on April 14, through listed subsidiary Ukusekela.
After meetings with the JSE and regulatory authorities, Nutritional Holdings issued a Sens announcement last week clarifying that its new cryptocurrency business is not linked to it or subsidiary Ukusekela.
It appears the listed company, which must adhere to JSE regulations, needed to distance itself from its fundraising efforts and unregulated currency.
Nutritional Holdings did not disclose how much had been raised through its initial coin offering on April 14, but said the money has been transferred from Ukusekela to the company Cannacrypt.
Nutritional Holdings executive director Nikyhle Dasarath registered the private company Cannacrypt on March 30 and is the sole director.
However, Nutritional Holdings’s statement explained that the undisclosed money it had raised has been ring-fenced, placed in a trust, and will be used to grow the listed entity’s cannabis business.
Nutritional Holdings also said it was engaging with regulatory authorities, including the JSE, the Companies and Intellectual Property Commission and the Financial Sector Conduct Authority (FSCA) to ensure its cryptocurrency sales are formalised.
Cannacrypt, which is less than a month old, has applied to the FSCA to be registered as a financial services provider.
Cannacrypt is going to publish a prospectus, to establish best practice in absence of regulations, which could potentially set a precedent for initial coin offerings and cryptocurrency regulations.
Once it has registered its prospectus with regulatory agencies, it can then offer its Nutritional Holdings shareholders an opportunity to buy its cryptocurrency at a preferential rate
The final terms and conditions for the agreement between Nutritional Holdings, Ukusekela and Cannacrypt are being drawn up and details will be announced in due course, it said in a statement.
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