RE:RE:RE:RE:RE:RE:RTO ProcessI'm certainly not an expert on this. It's been more than a decade since I studied these topics and haven't been personally involved in many.
In this case Sun Pharm was not a publicly traded company. If they were, I imagine they would have implemented a completly different strategy. Since they were not, all they had to do was figure out the values of both companies and issue the corresponding amount of shares of the new entity (Zenabis) to keep those percentages the same.
This is probably an over simplification, but let's say company A is publicly trading and worth $1 million and company B is worth $9 million but is not publicly trading. So, if company A has 25 million shares outstanding they would need to 250 million shares of the new company to keep the ratio the same. Then they give all the company A shareholder a 1 for 1 exchange and give the company B shareholders the same percentage they held of the remaining 90% and everything equals out.
I think one of the main reasons this RTO is better than typical for the existing shareholders is because the family that started BEVO always maintained a controlling interest in the company and would not agree to a deal that did not give them full value for their shares. The new company has not issued new shares on the primary market (like an IPO) in order to raise capital. No ones's shares have been diluted. The reason this is a good merger is because each of companies brought to the table what the other company did not have. Sun Pharm brought experience in Canabis, supply deals, developed products, research & development, extraction facilities, and a coast to coast business foot print. What they lacked was the growing facilities they needed to become a major player. Bevo has a team that knows how to grow anything, management with integrity that is unparalleled in the industry (look at what is going on with Aphria) and has millions of square feet of state of the art green houses in the best area in the country for growing.
For Sun Pharm, instead of going through the process of going public, issuing an IPO to raise money to allow them to buy land, build facilities, hire the required expertise, they found a company that had everything they needed and almost nothing they didn't need. It gets them operational years faster while also protecting the value of their investment. Cubic Farms shares were spun out prior to the transaction to further preserve value of the existing shareholders, another example of the way the deal was designed to protect shareholders of all parties.
There is risk in any investment but having management with integrity can not be over rated. Alost overnight, Zenabis has become the 3rd largest company in Canada in terms of sq. footage of gowing space, only behind Canopy and Aurora. They have more than Tilray, Aphria, Cronos, Hexo, Cann Trust, Green Organic Dutchman etc..
In my humble opinion, Tilray, Canopy and Cronos are highly over valued relative to the industry. Several others are were also overvalued but have recently seen stock prices correct back to where they are closer to or a little under value. I think Zenabis is currently the most undervalued stock in the Canadian Canabis industry, They have great management and I believe they offer the best available opportunity for a long term investment. Cann trust is probably the next best, but I don't know very much about them. Also, now that Zenabis has all this production space, they can go out and get more supply deals because they know they can deliver. Undervalued and great growth potential! I am excited to see where this will go over the coming years. Good luck to all!