Posted on the Weed BoardI posted this earlier today on the WEED board for "Tim you crack me up McCracken". Thought I would share on this board for those that didnt get a chance to read it.
Tim, you are assuming that Aphria is going to further dilute in order to raise $490 million dollars. I'm making the assumption that they will be able to raise part of the $490 million through bank financing. Nothing wrong with your calcualtions if your underling assumptions are correct. However, my guess is that Aphria will be able to access traditional bank financing long before they ever need to dilute to the tune of $490 million dollars.
In order to determine who got the better deal you need to take into consideration the possibility of Aphria being able to access capital by means other than dilution. Lets see how all this plays out. Sometimes its hard to analyze a deal in the first week.
Don't get me wrong. You got a great partner. Now lets see if they can help turn the ship around. CB was the best thing that happened to CGC shareholdees, despite Bruce walking into it backwards.
BTW...if an investor approaches Aphria with a simialr deal to buy a 10% stake in the company tomorrow, I'm hoping management would tell them to acquire shares in the open market. Why? because they can. I prefer mgmt wait another 3 to 5 years to maximze shareholder value before entertaining offers. Why 3 to 5 years? Because I believe Aphria will be worth way more after completion of phase V than it is today. Its that simple. My greatest fear is they sell out too soon. Sometimes management objectives and shareholder objectives don't necessarily align, however I dont feel that is the case with Aphria. All parties are rowing the boat in the same direction.
I also believe managment started LHS to thwart premature hostile takeover bids while providing time to expand their Canadian, U.S. and Global operations. Stick to the long term plan while adding states one at a time. Solid growth, great finacial statements and cash flow positive makes for a very attractive take over target.
Who knows, maybe CB decides to get into a bidding war for Aphria 3 - 5 years from now. Nothing wrong with that.
Look at what happened to wineries aquired by CB. Investors holding shares for the most part all made money. Those that I talked to stated their only regret was that they were bought out sooner rather than later. Shareholder value wasnt maximized.
Good or bad, CB has locked in CGC. There will be no bidding war by competing companies for CGC. CB took care of that. It is hard to determine right now how much money Bruce left on the table, if any, only time will tell. Long term shareholders should be fine.
With CB now involved don't be surprised to see CGC softening its stance about doing business in the U.S.
M
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