Opinion and HIP CMED Synopsis My opinion.... Original deal was priced right in November. I still think it is priced right. I own both CMED and HIP shares. Here's why I own both and here's why I think the deal was/is still priced right.
HIP caught the cannabis stock rally/price ramp up. CanniMed did not. That is not because CMED was uis not as good a company or was unworthy of the ramp up but rather they did not get a chance to enjoy the entire ramp up because Aurora's hostile takeover price capped their stock price at $24. So while other weed stock grew 300-500% CanniMed grew at a similar pace to its' industry peers and then stopped in the $24 range ($21-27). Why? Because that was the Aurora hostile bid price. Absent the downward pressure from the Aurora bid CMED should have enjoyed the same industry ramp up in its entirety and be trading well north of $45 right now.
The synergies of the deal with HIP in my opinion would (in the current market) see the value per share of the CMED/HIP combo trading higher still. Imagining that the combined business would trade at a minimum of $50 I did this math 50X33/1000=$1.650. Note: if this deal is approved CMED price should go up immediately because the downward pressure from the Aurora bid also lifts immediately.
If you are speculating on this just pick the price you think the combined entity will sell at post merger (or what CMED should snap up to after merger approval is announced) and multiply by 33/1000 to establish what you may want to pay for HIP shares. Discount this price as you wish to factor in your wished for future profit and your tolerance for risk.
$45X33/1000= $1.485
$50X33/1000= $1.650
$55X33/1000= $1.815
$65X33/1000= $2.178
$75X33/1000= $2.475
$90X33/1000= $2.970 etc.
I own both CMED and HIP shares. I've owned HIP shares since before the recent industry price ramp up and have held them through this. I bought CMED above $24 speculating that the deal will go through. If it does not CMED shares should still be worth at minimum the hostile offer price so the downside is mitigated. I continue to own HIP shares speculating the that if the deal happens to fail for some reason HIP will run again on its own.
Finally, based on current market capitalization of peers the CMED/HIP combo could ramp to 3-4 billion if the industry valuations just hold their ground at current levels and CMED/HIP just catches up to the new normal in Cannabis valuations. Post merger there will be about 37million shares outstanding. Let's use 3 billion as a market cap. $3,000,000,000/37,000,000shares = $81per share. So future value of HIP share at that valuation would be $81X33/1000=$2.673
Lots to chew on here but I hope this helps people figure out how much they are willing to pay for HIP and CMED shares.
Invest wisely!!