Cresco Labs stock is down 5.2% on Thursday after the company announced the expiration of the necessary waiting period under the HSR Act ahead of its acquisition of Tryke Companies.
Cresco Labs Stock Down Due to Asset Light Deal
Cresco Labs Inc (CSE:CL) (OTCQX:CRLBF) had announced the $282.5 million USD acquisition of the Nevada-based firm back in September, which also sent Cresco Labs stock tumbling as investors expressed their apprehension towards the deal. Tryke is a medical marijuana firm with considerable assets in Arizona, Utah, and its home state of Nevada, giving Cresco an enviable position in those areas. The deal will give Cresco Labs control of six dispensaries, including Tryke’s flagship location Reef Dispensary, located adjacent to the Las Vegas Strip.
The deal passed through the HSR waiting period without the need for further requests from the Department of Justice, and the transaction is anticipated to close during the first half of 2020, subject to certain closing conditions, including the approval from the States of Nevada, Arizona, and Utah. Despite the clear benefits of establishing a strong presence in those states, Cresco Labs stock is in the red due to the relatively small asset portfolio that the company will now take control of.
“This transaction represents the final major piece of our targeted footprint. Upon the closing of the Transaction, Cresco will have cultivation, processing, and retail assets in strategic and culturally significant legal states representing 71% of the U.S. addressable cannabis market. The Company’s focus on distribution and brand building will enable it to continue to capture solid market share in each of these key states as legal markets continue to develop,” said CEO Charlie Bachtell in a statement. Cresco Labs shares are currently trading at $8.39.
Aggressive Expansion Strategy
Tryke is not the only Cresco acquisition nearing completion. Last week, the company announced that its $1 billion USD takeover of Origin House, one of the largest acquisitions in the cannabis industry, had also passed through the necessary waiting period. News of that deal sent Cresco Labs stock soaring 8% as the company continues its aggressive expansion strategy. With earnings expected next month, it will be interesting to see how the cost of that strategy is reflected in its books.
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