Newstrike Brands Ltd NWKRF

Arbitrage 101 for dummies

[PROtrading]

Ok class, here is your Arbritrage 101 for dummies session. Now, pay attention because there will be a test on January 23rd ok?  And there will be many POP quizes along the way!  Including today's POP quiz on HIP.  Hope you get a GREEN grade, not a RED grade! ok?

Management and the boards at HIP Newstrike and CMED Cannimed have agree to merge.  The two sides have worked hard on the integration and both sides are recommending to shareholders they approve the deal.

The new entity will be called Cannimed and will continue to be traded as CMED.TO since institutional investors invest in TSE stocks and shy away from volatile Ventures .V stocks.  Please see the other class "Investing in the sewers of the Ventures" for details.

Now.  Owneship of the "new" Cannimed will be made of about 2/3 old Cannimed shareholders and 1/3 old Newstrike shareholders.  Extra marks if you can call out the exact ratio boys and girls!

The ratio for the merge is 1000 HIP.V shares for each 33 CMED.TO share. That's 100 HIP shares for each 3.3 CMED shares.  Still ok on the math boys and girls?

Now the math gets COMPLEX!  LOL!!!  

If you have $1000 to invest, you can get: 

$1000 of HIP or
$1000 of CMED

Now, at today's price, that's about 400 shares of HIP or about 40 shares of CMED.  I'm using "about" because the stock is volative (can go up and down HUGE).

What's more intelligent to buy with your $1000?  HIP ashares or CMED shares?

CMED is kinda attractive because smelly bully Aurora offered a stink bid, HOSTILE with NO discussion between the two management group before going public.  That's NASTY! So CMED is artifically getting kept down for the hostile, cheap take over by market bully and bad boy ACB (who wants to dislodge King WEED.TO from market cap #1 spot)!

Back to your $1000.

With HIP you have 400 shares, with CMED you have 40 shares.

Post merger HIP-CMED merger to form "new CMED" you end up with 

HIP: 400 HIP shares /100*3.3= 13.2 new CMED shares
Old CMED: 40 shares = 40 shares new CMED shares

Assuming post merger CMED is $100 per share since they now compete with the top #3 stocks (WEED.TO, ACB.TO and APH.TO) your net would be:

HIP: 400 HIP shares /100*3.3= 13.2 new CMED shares *$100 = $1320
Old CMED: 40 shares = 40 shares new CMED shares * $100 = $4000

So, are you better buying HIP today or old CMED today?  That is the POP quiz for today.  Grading will occur January 24th boys and gurls!  Don't be the class dummy!!!!!!