Innovative Industrial Properties Signals That It’s Overpriced

On Thursday, Innovative Industrial Properties (IIPR) announced that it will issue approximately 1.3 million common shares to the public. However, the company will still issue another 195,000 shares as a purchase option for underwriters. The shares will be issued at a common price of $126. The company expects to raise $163.8 million

Innovative Industrial Properties intends to use the funds from the offering to invest in real estate assets. The company provides real estate solutions to medical cannabis players. The real estate assets purchased in line with the offering will be used for cannabis-related activities. The company will also use the funds from the offering for general corporate purposes.

How did the stock react?

Since the announcement, the stock has been trading lower. Today, the stock lost almost 10% in the early trading session. Likewise, Canopy Growth was trading 3.9% lower around the same time. The Horizons Marijuana Life Sciences ETF lost about 1.9% as well. The weakness in HMMJ indicates the lower sentiment for the cannabis sector today.

Why did the stock fall?

To learn why the stock fell, investors should understand the signal behind Innovative Industrial Properties issuing new shares. Usually, a company issues its own shares to raise new capital in the public market. When stock prices are high, the company can get the most capital with the least amount of dilution. The market often sees issuing new shares as an indication that the company thinks it’s overpriced.

Innovative Industrial Properties was already trading significantly higher over the past few days. By issuing shares at $126, the company is indicating its own fair value assessment.

In the US, there are many opportunities in the cannabis space. Investors have poured their capital into Innovative Industrial Properties over the past few months. The company has grown almost 50% during this period. Most of the company’s peers in the industry have gone sideways.

Innovative Industrial Properties isn’t like other cannabis players. The company doesn’t cultivate or produce cannabis-related products. The company leases properties to cannabis players on a triple-net-lease basis. To learn more, read Innovative Industrial Properties Continues Its Stellar Run.