Acreage says fixed shares worth zero in Canopy USA deal
Holders of Acreage Holdings’ (CSE: ACRG.A.U, ACRG.B.U) (OTCQX: ACRHF, ACRDF) fixed shares will likely get nothing when Canopy Growth’s (TSX: WEED) (Nasdaq: CGC) acquires the U.S. cannabis operator next month, a stark yet unsurprising reversal from the deal’s multi-billion-dollar valuation half a decade ago.
A June convertible note offering severely diluted the fixed shares, Acreage said Monday, making them worthless at Canopy’s current $3.90 share price. The company provided a sliding scale showing fixed shareholders would only start receiving value if Canopy’s stock rises above $5.
“As a result of the material impact of the Offering it is anticipated that the current holders of Fixed Shares will receive zero value upon closing of the Acquisitions,” Acreage said in a statement.
The deal’s completion would mark the end of a complex, years-long transaction first announced in 2019 when Canopy agreed to buy Acreage for about $3.4 billion, betting on U.S. legalization. Those early consolidation wagers have mostly soured since, with deal terms repeatedly revised as cannabis stocks plunged and federal legislative efforts lulled.
Acreage reported a $22.2 million third-quarter loss as revenue fell 30% to $39.6 million. As of Sept. 30, the firm carried $274.6 million in total debt. Earlier this month, Canopy posted a C$128 million loss on declining revenue of C$73.9 million.
“We remain highly optimistic about the momentum building within Canopy USA,” Canopy CEO David Klein said on an earnings call earlier this month, noting plans to leverage Acreage’s assets alongside recently acquired brands Wana and Jetty.
Klein, who plans to step down by March, said Canopy is focused on “deeper, not wider” U.S. market penetration through its Canopy USA subsidiary. The Canadian firm’s worked to shore up its finances, prepaying $100 million in debt last month.
Acreage’s floating shareholders will still get 0.045 Canopy shares per share held when the deal closes, expected in mid-December.
