EMH stock is up 8% today despite Emerald Health Therapeutics (TSXV:EMH) (OTCQX:EMHTF) entering into a dispute with Village Farms International (TSX:VFF) (NASDAQ:VFF) over the terms of its supply agreement relating to Pure Sunfarms, a 50/50 joint venture between the companies.
Dispute Arising From Falling Prices
EMH stock is gaining today as the company defends its position in a supply agreement between the two firms, refusing to pay $7 million CAD that Village Farms argues is owed to Pure Sunfarms. The dispute arises from what is described as a “price deficiency obligation,” which is a commitment by Emerald Health Therapeutics to purchase 40% of Pure Sunfarms’ total production. Failing to do so, it must pay the difference between the market price of the cannabis and the predetermined price in which Emerald is to pay if that price obtained is lower than the market price.
Emerald Health Therapeutics believes that due to the manner in which the joint venture conducted its recent cannabis sales, it does not have a liability to the joint venture under the Supply Agreement. Village Farms argues that the declining wholesale market price of Pure Sunfarms’ cannabis resulted in reduced margins and led to the joint venture selling some of the excess product in the spot market at prices lower than the predetermined selling price under the supply agreement. EMH stock is trading up 8% at $0.71, while VFF shares have also gained slightly to $6.86.
EMH Stock Gains Ahead of Legalization 2.0
Earlier this month, Pure Sunfarms began shipping branded, packaged dried cannabis products to the British Columbia Liquor Distribution Branch (BCLDB) ahead of legalization 2.0, which comes into effect today. EMH stock soared 22% in one session back in August after it published preliminary Q2 results, highlighting the benefits that the joint ventured had on its books. Pure Sunfarms is capable of producing cannabis at an industry low price of $0.65 per gram, and Emerald’s President, Dr. Avtar Dhillon described the venture as “tremendously valuable asset.”
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