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Acreage Holdings: Canopy Growth Target Needs A Payday Loan

Jun. 01, 2020 5:29 PM ETAcreage Holdings, Inc. (ACRGF)CGC, WEED:CA70 Comments
J Cooper profile picture
J Cooper


  • A $10 million loan for four months.
  • Investors pay approximately 17% in fees and dilution, or 60% annualized.
  • Acreage trades at a huge discount to Canopy Growth due to risks of insolvency.
  • I will steer well clear of this company.
  • Looking for a helping hand in the market? Members of The Growth Operation get exclusive ideas and guidance to navigate any climate. Get started today »

Source: Acreage Holdings.

On Monday, Acreage Holdings (OTCQX:ACRGF) announced an odd funding transaction: Selling $11 million of convertible debt at below par value with a conversion price well below market rates. This isn't Acreage's first unusual funding transaction, as their February $100 million funding round also was difficult to understand.

To make sense of this transaction, I break down what occurs in a reasonable scenario where the investor cashes in their convertible debt for shares and Acreage repays the loan before it all becomes an extremely cheap stock offering. In that scenario, Acreage ends up paying an effective 17% fee to borrow money for four months. This is a "payday loan"-like fee that works out to 59% interest annually.

Acreage trades at a steep 68% discount to its value in Canopy Growth (CGC) shares if that deal was ever to be consummated. Wall Street is pricing in very substantial risk that Acreage follows iAnthus into default and perhaps follows Sunniva into insolvency. It's a difficult time to be a money-burning cannabis company.

Payday loan

Acreage is raising $60 million through two financing actions: A standby equity sale agreement and issuing secured convertible debt. Basically, Acreage secured the option to sell equity at a 5% discount to market prices and is taking out a payday loan.

First, Acreage will raise up to $50 million selling equity to an institutional investor in a Standby Equity Distribution Agreement ("SEDA"). Under the agreement, the investor will purchase Acreage shares for the greater of (1) 95% of their five-day weighted average price and (2) the lowest price allowed by the Canadian Securities Exchange. There also are limits on immediate resale of these shares -no more than $5 million worth can be sold in June. The press release notes that both Acreage and the investor will have some control over when these sales take place, although it does not provide full

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This article was written by

J Cooper profile picture
I used to run a Marketplace service called The Growth Operation.  That service has subsequently been moved to Julian Lin, who is highly-skilled in analyzing and evaluating the cannabis investing marketplace.Julian has renamed the service to The Weed Investors, and it promises to continue to be a great resource and community for investors interested in this growing sector.  I am a contributor to Julian's The Weed Investors community.Thank you to each and everyone who previously subscribed to The Growth Operation.  I appreciate all of your support.-J. Cooper

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (70)

No thanks on this stock
Acreage ; " They are a Management friendly Co " .…
@Jonathan Cooper ,
On the reread , wonder " How Long " you pondered on ' Toning Down ' that remark ,...Ha ..
Acreage , with their Political Cronies , has become an " Obvious Cash Cow " , as far as compensation it seems … Hmmm …
Wonder ' IF ' John Boehner is still hanging in there , as well as the Former Canadian Prime Minister …
Ahhh , everybody needs a Job after One's Political Career hits the SKIDS …
Yep , a delayed reporting should be / could be another Nail for those invested ..
HA . even if it's on time ...
Wonder how Darren feels about this ?? ..
He was In Love with this TRAIN WRECK from the Get-Go ….
Just my thoughts , and last I checked , I am allowed to have them …
G.L.T.A. Invested ? ..
OneStrawRevolutionFarming2023 profile picture
Perhaps its time to invest in the OR market: $100 million for the first time in a month :-)


Excellent quality at ALL prices points with many outlets is the template that can be exported to other legal jurisdictions for success; specialists - Ultra premium or Premiums or Low-cost - that try to cater to one sector of the market might not be able to compete with this approach :-(

Polyculture in the soil microbiology and polyculture in pricing :-) Monoculture and mono-cropping likely will not be able to compete :-)
OneStrawRevolutionFarming2023 profile picture
Review: studies of cannabis and Covid :-)

newfruit......did you hear about "Edwin Moldauer"?
yes you did!

STZ , Gov and courts hide not only accounting irregularities but lots of HATE crimes going back almost 20 years.
...any comments " Belgium"?... evidence rather well documented.
belgium profile picture
No matter How many accounts you use, your “evidence” has been debunked in every court you went to. Nothing came from it, and nothing will come from it.

You are now so bitter and disgruntled that you have to whine and complain repetitively on this forum, spamming every board with baseless links and claims.

I sincerely hope you’re at least getting paid for your useless efforts, if not, i don’t think there’s a shrink on this planet that can help you and the many voices in your head.
what's going on with. ITHUF . anybody knows what happening with the earnings report or I'm l just lost .
J Cooper profile picture
@smithsonj520 They just pushed Q4 back to June 15th, I believe. They sure are taking their sweet time...
Jonathan , we are diverting her from real issues few paragraphs above. Noted.
J Cooper profile picture
Nah, just ignoring your multi-account shenanigans.
@Jonathan Cooper ,
I Tried to respond to your Message , apparently I have been locked out on that platform ..
Sorry …
Cresco's new downtown location was right in the middle of the Looting Downtown ..
IDK if they got hit ..
No , I did not hear that Medmen story , thx for that ..
LHSIF has a New opening in Florida , stating 10 more by years end ..
Great News , today ..
$ACRGF , I agree with steering away from this Train-wreck ..
Great Read ...
J Cooper profile picture
Yeah, LHS plans are aggressive. I hope they hit them (since I own shares), although they've had a tendency to miss targets in the past, I believe.
@Jonathan Cooper ,
Yep , Building Cash is not a bad thing ..
Expanding on their own dime is always a plus ..
June report should be another Grand Slam ..
Imo , they are doing a Great Job over there ..
G.L.T.A. invested ..
newfruit profile picture
@Balaland when is LHSIF reporting? I was expecting in May but I guess not. Not seeing any info on this.
Stay away
J Cooper profile picture
Succinct. Wise.
well said ...either way you spin it STZ CGC Acreage are in a dodgy relationship. Wong Ho was right, a scam.
newfruit profile picture
@graduate FI What's the scam? Sell your shares, I don't get the complaints.

Only Wong Ho could write such foolish things. Wong Ho, is that you?!
STZ has documented decades long track record of irregularities or illegalities, in US and various countries, Enron pale in comparison, P/ E in stratosphere.
CGC has a valuation and had even higher based on inexistent market and systematic billion dollar losses,
Acreage was 19 when it signed a deal with CGC , now trading at 2 and financials are not worth the paper written on, and all three tie into STZ....So how you call that ? Act of God?.....Wong HO predicted many red flags to the point I guess was made to disappear.
belgium profile picture
“Wong HO predicted many red flags to the point I guess was made to disappear.”

Bahahahaha, you multi-alias/account clown. Everyone sees trough your BS.
Mebarrett3 profile picture
Toxic company imo.
OneStrawRevolutionFarming2023 profile picture

This site provides some medicinal hemp CBD and CBG seeds; I got some CBG seeds from HillBilly Skunk Farms :-)


It's growing season :-)
Mebarrett3 profile picture
Its growing season, but really tough this year. We had another hail storm yesterday and temperatures down to 42 deg. F. I had three successful years but this is proving to be much more difficult. Hopefully, the plants will recover and the ones that survive will be good for seeding for next year.

Thanks for the suggestion. The Tweedle Farms recommendation was really good.

I may try next year for CBG. I have an AC/DC strain that is high in CBD.
newfruit profile picture
Hey Coop thanks for the read. Is there a back-out clause in the CGC deal? Breakup fee?
J Cooper profile picture
@newfruit There is a $150 million USD termination fee in the contract. (Section 8.2(1).) However, the right to terminate doesn't appear to be unqualified; there is a list of circumstances where the deal can be terminated. (Section 7.2(1)(d)(i-iii).)

The full contract is on Sedar, although it's 218 pages. www.sedar.com/...
newfruit profile picture
Thanks for article/info and heads up it provides.
@johnathan cooper Anyway you could DM me or in/ thru day trade channel?
Great article really put things in perspective!!!
What about Columbia Care who is ONLY one with a CREDIT CARD allowed? I wonder who will get government contracts for accepting credit cards ?
It wouldn't surprise me AT ALL to see GWPH be the one to buyout STZ contract for CGC/ACREAGE, only makes sense since edibles/beverages for over the counter coming up , and ALL THE PATENTS for CBD GWPH, EMHTF has in testing in this country and others
It almost feels like ACB and Mr Peltz are friends with alot of politicians, and got wind of banking act. , for their share price to go from .90 approx. To 17.00 on a R/S or F/S of 12 to 1 . Does that mean their going too . Or GWPH's EPIDIOLEX suddenly get fda approval for over the counter?
Way too much money too give up
pumping sales/revs so markets go up, then to secure MORE funding , to expand footprints and diluting shares , look at where ACRGF ipo'd at and price now , or all of them for that matter
Look at origin house, who bought them out Less than a yr ago? What about IIPR, CGC/ACREAGE dont have stake in part of them or any growers or dispensaries IIPR services? I really think it's a shakedown before cares act is announced
To be honest I think the board of Acreage is either trying to shake out all people who cant stand to see price go down, and then announce banking act. So goes back up . IMO it's either cgc or CLRBF buying them out !!!! Or there really screwing over this 1 investor and few others which I kinda of doubt. Johnny, mike R , ,avtar , even gov. . Bill and a few others dont want to wreck Theirs or sectors reputation. Has anyone noticed that the botanists and cresco's strains are all over the place now ? Nevermind botanists and prime WELLNESS shops too !!!!! Acrgf has their hands in everyone's honey pot , look at how much and how many stakes they have in all these dispensaries in united states and CANADA !!! I dont think there going just drop all those revenues coming in , that's why they took loan from sharks , they need 3 months to build up revs. once banking act passed , cuz clauses in M/A's made. Thats half the reason they fired Bruce , Too Money Happy. So they took his rights away to do any M/A's and to send him to ALL the other dispensaries CGC/ACREAGE have a stake in , and to prop up sales . Which 1 is he representing now ? Gage, medmen , or Charlotte's web , KSHB, or the veterinary? They need to increase ACRGF, and decrease CGC stock price to offset STZ's short term losses. This way it's not a 2 for 1 . These are all politicians, they know exactly what their doing !!!! CRESCO has 1 of the largest footprints in Canada and united states, nevermind best products out there . Why did they also open NICI and hire/join forces with mr ward , mr Robinson, mr Gentile? Yes pump markets with alerts and updates on upcoming sales /ma's on ALL DISPENSARIES they have hand in . This is how they will make profits for THEMSELVES and ACRGF . STZ isn't going to just throw 4.1 billion out the window , and just exercise rights at 48.00 candian dollars per share for 2023 , while CRON, ACB ,APHA, TLRY ARE all popping for no reason, people know banking act is coming , Trump wont let someone else get props for signing banking law into effect , especially when theres election for presidency up for grabs . Hes going to do everything in his power to manipulate every one from Powell to Pelosi to keep these markets up during election, their his BABY'S , he'll tell them what they want to hear to get his way , along with pushing vaccines. Does anyone really think they would let trump take hydroxychloriquine with out it being completely fda approved (not fast tracked) ? There has to be people hire up that could stop him from taking it or he could go more ROGUE than he is now blowing countries up everywhere. He was blowing smoke up everyone's money makers That he was taking drug . Wait , aren't golfing resorts opening up? Yes !!!
and Johnny and Bill And THEIR REPUBLICAN buddies love to golf n bullsh$t in Florida !!!!
I bet Murph's probably been there too . It's all politicians, prime ministers and best people in the markets who are running potstocks IMO
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