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Cannabis Summary for May 10, 2021

2021-05-10 20:12 ET - Market Summary

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by Stockwatch Business Reporter

The S&P/TSX Cannabis Index lost 13.12 to 191.86, while the CSE Composite Index lost 23.30 to 800.51. The sector began the week with a multibillion-dollar merger announcement. Florida cannabis giant Trulieve Cannabis Corp. (TRUL), down $3.03 to $46.67 on 685,900 shares, is buying the largest operator in Arizona, Harvest Health & Recreation Inc. (HARV), up 49 cents to $4.84 on 6.39 million shares. The $2.1-billion (U.S.) all-share deal will create one of the largest MSOs (multistate operators) in the United States.

Harvest's shareholders will receive 0.117 of a Trulieve share for each Harvest share. Based on Friday's closing prices, this ratio values Harvest's stock at $5.81, a 33-per-cent premium. It is still barely one-third of the all-time high of $14.90 that Harvest was trading at just two years ago. The long slide reflects a troubled balance sheet. Harvest was $265-million (U.S.) in debt as of Dec. 31, with $245-million (U.S.) coming due next year, but it had just $92-million (U.S.) cash as of March 26. Founder and chief executive officer Steve White said in March that Harvest was "actively working to address our 2022 debt obligations." A takeover by Trulieve, with its large cash hoard and its ability to turn a profit -- all too rare in the cannabis industry -- is certainly one way to take care of that.

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