Despite assurances from both sides, CGC stock is currently down due to a lack of confidence in the Canopy-Acreage Deal.
It seems not everyone shares the same interest in the Canopy-Acreage deal. Back in April, Canopy Growth (NYSE:CGC) (TSX:WEED) said it would acquire Acreage Holdings (OTCQX:ACRGF) for more than $3.4 billion. A month later, Acreage said it remains confident about the acquisition. But recently, various sources have come forward with a certain level of pessimism about the deal. And that mentality is starting to impact CGC stock.
CGC Stock: Canopy-Acreage Deal Negatively Impacting It
On April 18, 2019, cannabis company Acreage Holdings announced that it had reached a purchase deal, granting CGC the right to buy all of Acreage's stock. The companies informed that the deal would go into effect after legalization in the United States. And at the time, CGC stock benefited from the news. Now, however, people seem to be worried about a deal that depends entirely on cannabis legalization in the U.S.
According to Bloomberg, the CEO of iAnthus Capital Holdings is skeptical about the Canopy-Acreage deal. Hadley Ford said that a deal that depends on the United States legalizing cannabis creates several risks for both parties involved. Further, the structure of the deal limits the target's possible stock gains: “There’s no new capital associated with that and I think it puts a limit on what your upside might be."
It's not just Mr. Ford who is wary of the deal, and that fact likely plays into why CGC stock is suffering on the market this month.
According to Yahoo Finance, as of 12:35 PM EDT, CGC stock is trading at $44.49 on the NYSE. This puts CGC stock down 1.24%. On May 16, CGC stock was seen sinking as the market gained. It closed around $45 on the day.
Earlier this month, despite Acreage Holdings, a multi-state cannabis operator, saying it's confident the acquisition will receive shareholder approval in June, Marcato Capital Management LP called out the deal. According to the activist investor, the Canopy-Acreage deal is a "value-destroying" transaction. It even recommended shareholders of Acreage Holdings vote against the deal.
So, with this kind of public feedback, are we really surprised to see CGC stock trading in the red today? It's not just CGC stock either; ACRGF stock is down around 0.42% at the time of writing.
In retrospect, this shows what investors have long known: companies can do everything they have too, they can check all the boxes, and public opinion can still make or break something.
What do you think about CGC stock trading down today? Do you think it has to do with the recent pessimistic comments about the Canopy-Acreage deal?
Let us know what you think in the comments below!
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