Charlotte’s Web Stock Up 8% After Ontario Court Approves Abacus Deal
During the COVID-19 pandemic, many marijuana stocks suffered, quite similar to stocks from most other sectors. But with the re-opening of the global economic engine, some of these hemp stocks like Charlotte’s Web are regaining positive momentum. Is the 8% bump indicative of more good things to come from this hemp stock in 2020?
Charlotte’s Web Holdings Inc (TSX: CWEB) is one such hemp stock that showed signs of recovery when the market opened on Monday. Charlotte’s stock price gained 7.5% on June 8, 2020, to finally close at CA$9.27. In the OTC markets, the stock moved just above 8% to the $6.89 at the time of the market close.
Since May 11, 2020, the CWEB is up by 57%. This hemp stock is recalibrating in an attempt to set off its negative year to date returns. On January 2, 2020, the stock price in the Toronto exchange was CA$ 9.76 and the current YTD returns are -0.05%.
Charlotte’s Web acquisition deal of Abacus Health
Charlotte’s Web has been working to increase its presence in the alternative medicine sector with its distribution of CBD-based products. Cannabidiol is the non-psychoactive cannabinoid used for pain relief among other maladies. The acquisition of Abacus Health Products Inc (CNSX: ABCS) was one of the integral steps by Charlotte’s Web in its plan to become the world leader in CBD-based product formulations.
Abacus Health manufactures pain relief products using CBD. The acquisition deal was first announced in a release by Abacus Management Information Circular on May 4, 2020. This acquisition will catapult Charlotte’s Web position as a leading vertically integrated company distributing hemp-derived products. The deal was approved by the Ontario Superior Court of Justice on June 8, 2020.
After this news of approval broke out, Abacus Health stock price shot upwards by 7%. At the end of the trading hours, the stock quote was CA$7.70. Whereas in the OTC Markets, Abacus stock (OTCMKTS: ABAHF) was up by an impressive 13%.
Key points of Charlottes’s Web | Abacus deal
Both the companies entered into a definitive arrangement agreement on March 22, 2020, to formulate a plan for a smooth acquisition. As per the arrangement, Abacus stakeholders were entitled to approximate 38% premium calculated on the 10-day trading prices based on volume-weighted average as well as a 43% as per the quotes at the end of the trading hours.
Abacus stakeholders will also receive Charlotte’s hemp stocks on the Toronto exchange and subordinate voting shares on the Canadian Securities Exchange. From the perspective of financial profitability, this deal is expected to improve cost synergies by effectively upscaling production, sharing of intellectual property, and improved sales prospects by leveraging cross-distribution channels and selling opportunities. We would recommend adding Charlotte’s Web to your watchlist as we believe this stock will continue to gain momentum in 2020.
Charlotte’s Web Stock Up 8% After Ontario Court Approves Abacus Deal
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