RE:RE:RE:RE:RE:RE:RE:RE:The shares offered from previous deals haven’t gone throughUnreal post thanks for sharing.
Analystguy wrote: I said I wasn't going to write anymore in this forum, but here I am back at it again.
First - I have a long position in ACB that is larger than most institutional investors.
Re Farmacias Magistrales, I don't know the financials of this company nor do I
know the amount of shares ACB will issue to assume control of this Mexican
entity.
Farmacias Magistrales is classified as a Retail Pharmaceutical company.
According to the company website, it owns a 12,000 sq ft laboratory in Mexico
City and has been in business for 7 years. The lab makes CBD/THC products
that target the medicinal alternative market via health professionals throughout Mexico.
Pictures of the laboratory are shown if you Google
"Farmacias Magistrales." The location and pictures of the physical plant to me
speak volumes as to the relevance and industry success of this company. I
don't see what ACB can bring to the table beyond more CBD/THC and Farmacias
Magistrales already has that.
Here is the URL -
https://www.google.com/maps/@19.2780098,-99.1812815,3a,56.8y,278.08h,90.63t/data=!3m6!1e1!3m4!1sULECWpomdbti2Htvc4xUUA!2e0!7i13312!8i6656
I have been involved with buying and selling multi billion dollar companies.
Typical analysis looks at synergies made possible by acquisition and boiling
these down to a Net Present Value of Discounted Free Cash flows at a Weighted
Average Cost of Capital. Also looked at is the Enterprise Value/EBITDA ratio
and EBITDA multiples of the industries - just to name a few.
MedReleaf was profitable in 2017 and prompted me to make a sizeable
investment. In 2018, however, it became clear that profit was no longer the
motive and the company looted to a loss prior to sale. For example,
Gimelshtein - a recent MBA graduate with 10 months experience on the job as
CFO, was given $3+ million in stock options. Others, including Ray Leitch
(RayRay Investments) regularly sold huge tranches of stock on the open market
and beat the stock price down.
MedReleaf let it be known it was for sale. ACB obliged with an all share deal.
Upon the sale MedReleaf insiders began shorting ACB stock to cash out their
ACB positions. The stock price declined. It was the ACB shareholder that paid
the price as ACB stock went from $9.03 to $5.34 during the exit all the while
adding 300 million additional shares.
Latest financials show MedReleaf under ACB's control has an operating ratio of
2.0. In other words it costs ACB $2 for every $1 MedReleaf earns in revenue
from sales. This subtracts from ACBs bottom line. But to me the most troubling
issue is ACB's balance sheet. A full 48% of its asset base is Goodwill. This
is the promise that things will get better in the future. The issue is $2.1
billion of this goodwill is from the MedReleaf acquisition that has the worst
financial performance I've ever seen. Yet ACB way it had a "great quarter."
Given what's going on over at Aphria and the claim it overpaid on it's LATAM
investments, the market appears willing to discipline a stock it deems
overpriced based on its fundamentals. Overpriced assets show up on the Balance
Sheet as goodwill, and ACB has by far the largest amount of goodwill of any
weed stock out there. Issuing more stock on anything less than a quality cash
flow positive investment will only add to it.
Re M&A activity to grow a company. You need to have a clear understanding of the realistic values that a merger will bring. What are the values this board sees in the Mexican deal?