In the cannabis space this week, two key players in the industry agreed to adjust a major deal that they first announced to investors last year.
Meanwhile, expert speakers at an online marijuana event discussed ongoing issues in the market, including where investors are directing attention and the slow path to federal legalization in the US.
Read on for a closer look at some of the biggest cannabis news over the last five days.
Canopy/Acreage deal value drops to US$843 million
News hit on Thursday (April 25) that Canopy Growth (TSX:WEED,NYSE:CGC) and Acreage Holdings (CSE:ACRG.U,OTCQX:ACRGF) have amended the terms of a unique deal that gives Canopy the option to acquire Acreage when cannabis becomes federally legal in the US.
The deal between the companies was first announced last April and was valued at a whopping US$3.4 billion. At the time, the arrangement was touted as a win for both parties — Canopy would eventually gain access to the US market, while Acreage would be able to draw on Canopy’s “deep pockets.”
This week’s announcement decreases the value of the transaction to US$843 million, according to BNN Bloomberg, a far cry from the original multibillion-dollar amount. According to the companies, the change was made partially due to current market conditions:
Considering the challenging economic environment and increasingly tighter and volatile financial market conditions, particularly for cannabis companies, Acreage determined that the New Arrangement represents the best available prospect that is compliant with the terms of the Arrangement Agreement to maximize potential value for Acreage shareholders.
Under the adjusted agreement, Canopy will make an upfront US$37.5 million payment to Acreage shareholders, which works out to about US$0.30 per existing share.
The arrangement will also see Acreage’s shares get split into fixed and floating classes — 70 percent of each existing Acreage share will be converted into a fixed share, with the remaining 30 percent converted into a floating share. Completion of the deal is still contingent on US federal legalization, and once it occurs Canopy will trade 0.3048 of a Canopy share for each Acreage fixed share; Canopy will also have the option to buy each floating Acreage share for a minimum of US$6.41.
Finally, Canopy will loan Acreage up to US$100 million to advance its hemp business.
Market watchers have had mixed reactions to the changes. Marijuana Business Daily quotes Cowen’s Vivien Azer as saying that it “significantly reduces potential dilution from the deal and provides some optionality.” The news outlet reported a less favorable reaction from Owen Bennett of Jefferies.
“Assuming Acreage can remain a going concern until such time as we reach federal legalization … Canopy faces guaranteed dilution from a business that, given its current problems and huge cost base, is only likely to add to the pressures currently being faced,” he said in a note. Acreage took a share price hit earlier this month when it announced a short-term $15 million loan with an interest rate of 60 percent.
For its part, Canopy has been in the news lately due to its turnaround strategy, which was announced in April. It also released its most recent quarterly results about a month ago, disappointing investors.
Key takeaways from Prohibition Partners LIVE
Many events in the cannabis space have gone online recently due to COVID-19 restrictions, and the latest was this week’s Prohibition Partners LIVE conference. The two day gathering touched on a number of key issues in the space, including changes in what investors want to see from companies.
On the whole, there was agreement that investors have matured and now prefer a simplified approach with a focus on cash flow — in fact, Alan Brochstein of 420 Investor and New Cannabis Ventures went as far as to say that investors will penalize companies whose business models are too complex.
Click here to skip to the Investing News Network’s overview of Prohibition Partners LIVE.
Aside from that, speakers at the web-based event discussed what’s happening with federal legalization in the US, a process that has ended up being much more slow and complicated than many market watchers had hoped. Brochstein suggested that for reforms to happen, the Democrats will probably need to control both the House and the Senate.
For his part, Narbe Alexandrian, CEO of cannabis investment firm Canopy Rivers (TSX:RIV,OTC Pink:CNPOF), believes that it will take two to five years for federal legalization to come to the country.
Cannabis company news
- Aleafia Health (TSX:AH,OTCQX:ALEAF) and Aphria (TSX:APHA,NASDAQ:APHA) have entered into a settlement agreement for a dispute surrounding a wholesale cannabis supply agreement. As per a press release from Aleafia, its subsidiary Emblem Cannabis will receive total consideration of C$29.1 million from Aphria. The deal was signed in 2018 and canceled in 2019.
- Aurora Cannabis (TSX:ACB,NYSE:ACB) shared an update on its corporate restructuring plan, which was announced this past February. Among other adjustments, the company said it has put a plan in place to close five facilities over the next quarters, a move that will impact about 700 employees; Aurora’s aim is to focus production on its larger-scale and more efficient sites.
- Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) signed an amended agreement for its acquisition of privately held GR Companies. The deal was first announced last year, and its value was pegged at US$875 million; now, like the Canopy/Acreage agreement, it has been downsized due to market conditions — in total, the acquisition is reportedly worth $700 million under the new terms. It is expected to close in the coming weeks, according to Curaleaf.
- VIVO Cannabis (TSX:VIVO,OTCQX:VVCIF) entered into two deals with Shoppers Drug Mart, one for product supply and one for clinic services. The company will provide the store with branded medical cannabis products, as well as cannabis education services for patients.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Meanwhile, two longstanding cannabis partners ended their relationship.
Trulieve to donate $20,000 in scholarship funding and $15,000 to support leadership development
Trulieve Cannabis Corp . (CSE: TRUL) (OTC: TCNNF), a leading and top-performing cannabis company in the United States today announced a new partnership with the Thurgood Marshall College Fund (TMCF), the nation’s largest organization exclusively representing the Black College Community. Trulieve will donate $20,000 to help fund several college scholarships awarded to students who are attending one of the organization’s member-schools as part of Trulieve’s diversity, equity, and inclusion initiatives. The $15,000 in talent funding is earmarked to support TMCF’s internship program, reaching a diverse talent pool of students and alumni from their 47 member-schools to provide immersive experiences at Trulieve.
The new dispensary expands patient access to Florida’s largest inventory of medical cannabis products
Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) (“Trulieve” or “the Company”), a leading and top-performing cannabis company based in the United States announced today the opening of a brand-new Florida dispensary, the Company’s 80th nationwide. The new location marks the Company’s first in Tamarac and third in Broward County expanding patient access to Florida’s largest and broadest assortment of high-quality medical cannabis products.
Revive Therapeutics Provides Update on FDA Phase 3 Clinical Trial for Bucillamine in COVID-19 with Planned Completion and Emergency Use Authorization Request
Revive Therapeutics Ltd. (“Revive” or the “Company”) (CSE: RVV, USA: RVVTF), a specialty life sciences company focused on the research and development of therapeutics for medical needs and rare disorders, is pleased to announce an update on the Company’s U.S. Food & Drug Administration (“FDA”) Phase 3 clinical trial (the “Study”) to evaluate the safety and efficacy of Bucillamine in patients with mild to moderate COVID-19.
With its recent $23 million dollar financing, the Company plans to aggressively expand from 14 clinical sites to up to 50 clinical sites to meet the next enrollment goals for the Study in Q2-2020. The Study is a randomized, double-blinded, placebo-controlled trial and the safety and efficacy data analyzed at each interim analysis timepoint of 210, 400, 600 and 800 completed patients are only made available to the Independent Data and Safety Monitoring Board (“DSMB”) for review and recommendations on continuation, stopping or changes to the conduct of the Study. In the event of any serious safety concerns, the DSMB would be notified to determine any risks and provide its recommendations. To date, in this initial 210 interim point there have been no serious safety concerns that required the DSMB to be notified.
HempFusion Wellness Inc. (TSX:CBD.U) (OTCQX:CBDHF) (FWB:8OO) (“HempFusion” or the “Company”), a leading health and wellness CBD company utilizing the power of whole-food hemp nutrition, is pleased to announce that its common shares have been approved for DTC full-service eligibility in the United States by the Depository Trust Company (“DTC”) and can now be both traded and serviced through DTC’s electronic book-entry system.
DTC is a subsidiary of the Depository Trust & Clearing Corp. (“DTCC”) that provides clearing and settlement services for the financial markets and settles the majority of securities transactions in the United States. This electronic method of clearing securities speeds up the receipt of stock and cash and thus accelerates the settlement process for investors and brokers, enabling the stock to be traded over a much wider selection of brokerage firms.