Why an Arb exists on the LEAF/ACB deal
I've seen a lot of people on here and other boards saying an arb exists (currently over $2.70 per LEAF share) because the market has doubts the deal will go through. I don't think that's the case.
On the LEAF side, a 66 2/3% is required to approve the transaction and 56% of shares have already been locked up in favor. So to collapse this deal, pretty much every person free voting would have to vote no, which is unlikely.
On the ACB side, only a simply majority of eligable voting shares is required to pass the deal. But if you vote no, you're dooming the company to an $80m break fee and an additional $15m costs fee - so again not likely for them to vote it down.
So if it's not doubts, why is there a pretty big arb here? Why aren't people buying LEAF and shorting ACB to close this spread out? That's because the borrow on ACB right now is extremely prohibitive for a big cap MJ name. Indicative rates this morning were about 30% to borrow ACB. At 30% borrow cost, a $2.70ish arb and assuming the deal closes mid August, about 68% of your expected gross arb profits are paid back in borrow fees. This is why the arb currenlty is so wide.