Why Did Canopy Growth Corporation’s Stock Price Skyrocketed on Monday?
(by Glenford S. Robinson)
Canopy Growth Corporation (NYSE:CGC) stock price skyrocketed by 14.24% to $56.89 from $49.63 on Monday because the company announced that it had acquired Hemp innovator Ebbu for a reported $25 million in cash and an eye-opening 6,221,210 in the Company’s common shares. That is a whole lot of money to spend on any asset.
So, this Ebbu deal better pan out or else a lot of money will disappear down the drain. In fact, another $100 million in purchase price will be due for payment provided that certain scientific related milestones are achieved within two years following closing of the acquisition.
Canopy Growth has many options at its disposal for satisfying the purchase. The Company can either pay in cash or in shares or a combination of both. If for instance the purchase is satisfied in Company shares, the number of shares will be calculated based on the volume-weighted average price of the shares on the Toronto Stock Exchange (TSX) for the 20 trading days immediately prior to or before the date of achievement of the applicable milestone.
Before any deal can be finalized, the transaction must be approved by regulatory means, which includes approvals by the Toronto Stock Exchange and the New York Stock Exchange. This will give rise to ongoing disclosures required by CSA Staff Notice NI 51-352 for US transactions. The purchase or asset acquisition transaction is expected to close in November 2018.
What does this mean for the stock price of Canopy Growth? This means that a high level of volatility should be expected during the time leading up to closure of the acquisition in November 2018. And in trading, the higher the volatility, the easier it is to make a profit. No volatility in the financial markets means no opportunity to make a profit. So, we can be rest assured that traders and short term investors will be gearing up to partake in the opportunities that lay ahead in trading CGC in coming days and weeks.
A little about the two companies in this merger and acquisition deal. According to the press release, Canopy Growth is a world-renowned leader in the diversification of Cannabis and Hemp products, offering a distinct category of brands and curated cannabis varieties in dried oil and Softgel capsule forms.
Leading sector iconic names such as Snoop Dogg, breeding legends DNA Genetics and Green House seeds, and Fortune 500 alcohol leader Constellation Brands have all forged deals and have established partnerships with Canopy Growth.
On the other hand, Ebbu a Colorado-based company specializing in designing cannabis-based medicine and mainstreaming adult-use cannabis is more of a cutting-edge medical cannabis research technology company that believes in the power of cannabis to change people’s lives, according to the company’s website. The website also said “the Company (Ebbu) is working toward a new paradigm where patients can be assured consistent therapeutic effects—and consumers can confidently choose the exact experience they desire.”
Disclaimer: © 2018 mstardom.com. Mstardom Finance does not provide investment advice. All rights reserved.
Disclosure: I am/we are long CGC.
This article was written by me, and it only expresses my opinions. I am not receiving any kind of compensatory reward for this article, and I have no business relationships with any company whose stock is mentioned in this article.
Editor’s note: This article covers one or more stocks that deals directly with products derived from the cannabis plant. Please be aware that cannabis and related substances are illegal in some American states and still remains a Federally band substance.
Mr. Glenford S. Robinson is the Chief Executive Officer and Founder of Mstardom Finance. He is the editor-in-chief of News and Magazine article publishing. Mr. Robinson is also the lead developer of the Mstardom Finance Platform at Mstardom.com. He is passionate about quantitative finance and technologies associated with that discipline, such as python-based algorithmic programing. Mr. Robinson is also a Clinical Laboratory Scientist currently practicing laboratory medicine. When Mr. Robinson is not practicing laboratory medicine, writing articles, or studying finance, he is creating mathematical and statistical modules, using quantitative approaches to identify trading opportunities in the Forex and Stock Market.