Aphria (APH.V) takes 16.6% of Canabo Medical (CMM.V) for $8.4m at big premium

12/07/2016

I love it when I get to use the phrase ‘company maker’, but it doesn’t happen so often.

Today, Canabo Medical (CMM.V) got to pull out the company maker t-shirts when it was announced giant Canadian weed concern Aphria (APH.V) would be taking out 16.6% of the company’s stock for $8.4 million, at a significant premium to the share price.

Sitting at $1.03 before the bell, CMM stock had already traded nicely over the last month, coming up from a low of $0.73 on November 24. We started talking about it last week at $0.90.

Today, after the Aphria news: $1.19, and that’s still $0.21 lower per share than what Aphria has agreed to pay.

champers

6 million shares will be added to the float, and Aphria will receive some much needed positive press on the deal.

“Canabo is one of the largest and most respected referral clinics in the country. Its commitment to educating both patients and physicians when it comes to prescribing cannabinoid treatment to effectively manage patients suffering from chronic pain and disabling illnesses, has resulted in Canabo becoming a market leader in cannabinoid medicine and assuring it is playing a meaningful role in improving the quality of life of their patients, consistent with the values we hold at Aphria,” said Vic Neufeld, Chief Executive Officer of Aphria, in a news release Wednesday. “We very much look forward to working closely with them as part of this strategic investment.”

We did a podcast with Canabo last week where they explained their business concept in great detail, though that plan has since expanded mightily.

Canabo has had plenty of positive news over the last few days, with this week’s announcement that it had done an LOI deal with a pain clinic to more than double its current patient numbers through a long term partnership.

Part of today’s announcement discussed an event that would, by itself, have justified a big share price increase on CMM, in that the company will be entering into a substantial study of the effect of cannabis treatment in three areas:

  • relation of opioid use following cannabinoid therapies by condition and patient category
  • relation of benzodiazepines use following cannabinoid therapies by condition and patient category
  • change in quality of life measurements following cannabinoid therapies by condition and patient category

The company will enroll some 7500 patients as part of this observational study through next year, with initial results by late 2017 and complete findings early 2018.

This study will be foundational for much of the ongoing shift in the medical community towards accepting of cannabis as a treatment. The patient numbers are substantial, the data is much-needed, and the findings will help the industry as a whole transform.

Aphria has made a litany of investments in the Canadian weed space, including one for a similar amount of cash in cannabis aggregator/financier CannaRoyalty (CRZ.V), which is due to go public Thursday. Aphria’s investment in the company valued them pre-listing at $75 million, months before the market began to run and stocks across the board stacked multiples on their value.

Canadian cannabis LP Emblem Cannabis (EMC.V) will list a day later, and is expected to peg a valuation far in excess of $150 million when it does.

— Chris Parry

FULL DISCLOSURE: Canabo Medical and Emblem Cannabis are Equity.Guru marketing clients

Related Posts

Latest Post

Leave a Reply

Your email address will not be published. Required fields are marked *