This Falling Cannabis Stock Is Not a Buy

RYTHM, Inc. (RYM), formerly Agrify, is down 1.5% year-to-date, which is way worse than AdvisorShares Pure US Cannabis ETF (MSOS), which has gained 28.1%, and it is a little worse than the Global Cannabis Stock Index, which at 7.21 has gained 4.8%. I last wrote here about RYM on 11/11, reiterating my negative view as I called it a horrible cannabis stock. The stock was then at $31, and it is now at $28.55 as of 12/18's close. While cannabis stocks have soared recently, this is not one to buy!

RYM Has Suffered a Huge Problem

In that last write-up of RYM, which I do not formally cover at 420 Investor, I reviewed the Q3 financials, finding them not impressive. The company continues to burn cash and has a lot of debt (held by partner Green Thumb Industries (GTBIF)).

The end of the federal government's shutdown came as a result of legislation, and this legislation contained a law that bans hemp cannabinoid products like the THC beverages that RYM's unit Señorita sells, as I mentioned in that last piece. The RYTHM website makes no mention of this pending change which will end their ability to sell these products next November. It's not just this company, as all of these companies are moving forward as if no change will take place. Perhaps the rules will change, but there is currently no active effort to change this law.. Here is one of the images on the website:

RYM Is Volatile

The one-year chart shows just how wild this stock has been:

The 52-week low was set near $13 in April. The 52-week high of $53.65 was set in October. Recently, the stock gapped up on 12/12, when the news came out about potential rescheduling, leaving a gap open still to $16.44. It traded as high that day as $50.38 on massive volume, and it filled a previously open gap in trading from 11/10.

I see support currently near $20, then $16 and $14. I see resistance currently at $30, $38 and $42. Note that the stock has traded as high as $84.44 since November 2024, when the news broke about the company and its involvement with GTI.

In H2 of 2025, GTI has substantially underperformed MSOS, where it is one of the three massive holdings. Perhaps the RYM involvement (ownership of stock and debt) is weighing on it!

I recently downgraded GTI at Seeking Alpha, changing my rating from Strong Buy to Hold. I still hold it in my 420 Investor model portfolio, currently a 6.2% position.

RYM Is Expensive

As I said in that last article, calculating the valuation of RYM is a big challenge. The company has just 2.04 million shares outstanding, so it has a market cap that appears to be just $58 million. This is not the correct way to assess it, though, as the fully-diluted share-count is much higher. In that last write-up, I calculated that there were an additional 13.9 million shares that needed to be added due to in-the-money warrants and convertible notes as well as RSUs.

At this lower price, some of the convertible notes are now out-of-the-money. Removing the last issue of convertible notes (conversion price of $29.48 for $50 million), I calculate the fully-diluted in-the-money share-count is now 14.3 million. Treating that single convertible note as debt now leaves the company with cash (with warrants exercised and with the other debt converted ) of $27.6 million. Subtracting this from the correct market cap of $408.3 million leaves an enterprise value of $380.7 million, which seems ridiculous. There are no analysts providing estimates for revenue or for earnings, and the cash-burning company trades at a significant premium to its tangible book value. RYM is providing zero guidance for investors.

Avoid RYM

While RYM may be down and may look attractive to some investors or traders, it seems dangerous to me. Yes, it has exposure to the GTI brands in cannabis, and this has value. I think that GTI looks like a much smarter way to invest in this. The THC beverage business looks to be worthless now. If the price continues to drop, its debt is really debt to a great extent, and the company is not even close to being profitable. I remain quite negative on RYTHM, Inc.