VFF

Village Farms ($VFF) CEO Reverses Course: From Seller to Buyer as Cannabis Strategy Shows Promise

05/20/2025 22:41

Village Farms International ($VFF) is drawing investor attention as CEO Michael DeGiglio returns to buying the company's shares in mid-May, a notable shift following substantial sales just eight months prior that signals a potential change in management's outlook. According to regulatory filings, DeGiglio purchased a total of 15,000 shares at an average price of $1.035 across May 16th and 19th. This transaction comes in stark contrast to his sale of over 400,000 shares at approximately $1.00 in September 2024. The CEO's purchase follows CFO Stephen Ruffini's acquisition of 20,000 shares at $0.92 in late September 2024, marking the second insider buying signal from top executives. This insider purchasing activity coincides with a significant rally in Village Farms' stock price, which surged approximately 59% from around $0.66 in early May to $1.05 by May 16th. Notably, DeGiglio executed his purchases during this upward momentum rather than waiting for a pullback. The executive team's actions align with Village Farms' strategic business pivot. The company recently completed a major restructuring by spinning off its traditional fresh produce business into a new entity called Vanguard Food LP, transferring $169 million in assets. While maintaining a 37.9% equity stake in the new venture and securing $40 million in cash proceeds, Village Farms has strategically shifted its core focus toward the global cannabis market. Despite this strategic redirection, the company's financial situation remains challenging. In its Q1 2025 earnings released on May 12th, Village Farms reported a net loss of $6.7 million ($0.06 per share), significantly worse than analysts' expectations of a $0.01 per share loss. Revenue declined slightly by 1.3% year-over-year to $77.1 million. However, a closer examination of segment performance reveals encouraging signs in the cannabis divisions. The Canadian cannabis operation has seen international medical exports surge by 285% year-over-year, while the Netherlands cannabis business generated $0.5 million in revenue with positive adjusted EBITDA in its first quarter of recreational sales, which began in February 2025. "We are in the process of transforming from a traditional agricultural company into a global cannabis enterprise. The recent restructuring was an essential step to focus our resources on the company's future growth engines," DeGiglio stated during the recent earnings call. Wall Street analysts maintain a "buy" rating on Village Farms with a median 12-month price target of $2.00, suggesting substantial upside potential from current levels. Nevertheless, significant challenges remain. Revenue for 2025 is projected to decline by 21.6% to $263.6 million, and the company has received an extension until October 2025 to regain compliance with Nasdaq's minimum $1.00 bid price requirement. Particularly problematic is the fresh produce segment, which suffered margin deterioration due to $4.3 million in incremental costs from dust storms affecting Texas greenhouses, contributing to a $7.8 million loss for the segment in Q1 2025. This situation further validates the company's strategic decision to pivot toward cannabis operations. For investors, Village Farms presents a mixed picture of risk and opportunity. While ongoing net losses and Nasdaq compliance issues raise concerns, positive signals include the cannabis segment's growth trajectory, international market expansion, and recent insider buying activity. Notably, the stock's low Price-to-Sales (0.34) and Price-to-Book (0.47) ratios suggest this small-cap company may be undervalued. Combined with the CEO's recent share purchases, this could indicate that insiders believe the current share price underrepresents the company's true value. Investors will be watching closely until the next quarterly results expected in early August to see whether Village Farms' business transformation progresses successfully and if management's apparent confidence translates into improved financial performance.

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