Before being quietly yanked from media outlets, Aleafia (ALEF.T) reportedly tabled a news release announcing a $4 per share offer to take out troubled amateur crime gang CannTrust (TRST.T) last week.

You may recall Aleafia as the company that took over Emblem Cannabis not long ago with a stink-bid offer the target jumped at, rather than work to reclaim their lost position as a leader in the weed space. That routine appears to be at play again.

So $ALEF planned/plans to launch a $605M bid that would see $ALEF offer to acquire all of the out​stand​ing common shares of CannTrust at a valuation of $4.00 per share.

Each CannTrust share would be exchanged for 3.6 Aleafia shares, and, if the deal goes through. #Potstocks

— Betting Bruiser (@BettingBruiser) August 2, 2019

At a $288 million market cap, ALEF’s all stock deal would reportedly come in for TRST with a $600 million valuation, a fair premium on today’s $400 million market cap, but a far cry from the $1.2 billion it was worth before CEO Peter Aceto’s Scarface routine came undone as whistleblowers alerted regulators the company was growing copious quantities of unlicensed product.

An expected clarification from Aleafia did not land, and news stories were removed, as others suggested the plan was scuppered entirely.

The proposed bid by Aleafia for CannTrust was cancelled last Thursday night. Maybe they asked Health Canada and the response was not to their liking. Or maybe they looked at the GGB deal and realized no one would take it seriously.

— Chris Damas (@BCMIResearch) August 2, 2019

“We firmly believe that we can provide CannTrust stakeholders with a clear path back to compliance while protecting the jobs of its employees, the medicine its patients require and its shareholders’ lost value, and are confident that we will meet these objectives following a successful bid,” said ALEF CEO and former Police Chief of Toronto, Julian Fantino, to the Globe and Mail.

[contextly_sidebar id=”zg7VGuWG2sqKPcxJmnMczOMvl7saXrxZ”]While it appears this deal isn’t moving ahead, it provides some interesting debate material.

• What caused the deal to fall over? Did Aleafia hear something that would indicate the license can’t be saved?
• Would a law enforcement-connected outfit like Aleafia provide a better landing place for a company trying to convince regulators to believe it ins’t a criminal enterprise?
• Will others come in to snare TRST’s assets while they’re still at risk of being deleted, paying less than their worth in return for that assumed risk? Or will other suitors wait to see what Health Canada has in mind?
• As TRST’s board entertains a strategic review, will we hear more rumours and read more news in the days ahead, and should investors trust any of it?

For mine, I’d guess ALEF’s offer was too low to not be outdone by a competitor, and they decided to kick back for a little and see if the stock will roll lower. In addition, I’d guess TRST’s board would be hard pressed to move on any deal while the license is in doubt, without that deal being very dependent on milestones.

If they did agree a sale that was dependent on the license being secured, it would probably make more sense to just wait until the license is secured and do a better deal at auction.

And if the license isn’t secured, there’ll be nothing much to sell.

Bottom line: As we’ve said since the TRST scandal came to pass, if you’re going to play with their stock, expecting a big news announcement and a sudden jump upwards, you’re playing a dangerous game. Health Canada must be seen to be doing its job, and that won’t be the impression folks get if TRST manages to get out of this intact.

— Chris Parry

FULL DISCLOSURE: No dog in this fight.