Shares of The Green Organic Dutchman Holdings (TSX:TGOD) (OTCQX:TGODF) are declining at present. Selling for $2.78 USD on the OTCQX, TGOD stock is down 4.14% as investors react to the company's recent news.
So what's going on?
TGOD Stock is Down on TGOD Spinout
The company announced earlier today that it distributed "new warrants of its spinout company TGOD Acquisition Corp to registered TGOD shareholders who elected to receive the warrants in January this year."
What this means is that TGOD stockholders who participated in the transaction will get 0.15 of one warrant in the new spinout company for each TGOD share held as of the January date.
This new warrant will entitle the holder to buy shares in the TGOD spinout at a price of $0.50 per unit. These new warrants will take effect as of June 3, 2019.
The press release states further that:
"Each new unit consists of one share and one warrant exercisable into one share of TGOD Acquisition at a price of $1.25 for a period of 24 months following the date that TGOD Acquisition shares begin trading on a recognized stock exchange."
What is The TGOD Spinout?
The Green Organic Dutchman has decided to create the TGOD Acquisition Corp. This is an investment company that aims to make cannabis deals across Canada and internationally. The CEO position is held by Daniel Brody, who was previously the former vice president of investor relations at TGOD.
Is there a reason why TGOD stock is reacting negatively to this news? Well, one could argue the necessity of a whole new company to make investments into other cannabis companies when TGOD itself is still establishing its core business and consumer base in a newly legalized marketplace. The venture will require the company to spend a lot of capital in the hope of receiving revenue back.
We've seen other investment companies such as Auxly Cannabis (TSXV:XLY) (OTCQX:CBWTF) struggle in the current climate. In this case, it is awaiting production from its multiple clients to deliver profits that have not been forthcoming.
What are your thoughts on TGOD stock and the spinout company? Were you expecting this?
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