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Details about the merger can be found in my article this month. From our past content, we know that during an M&A that is expected to proceed that the shares of the Acquiree (target company) become effectively a warrant of the Acquiror. What this means is that the relative change in share price of EMC should be the same
as the
relative
change in
share price
of Aleafia
all things
being equal.
The share
price of
EMC
increased by 68% since that Dec 21st $0.87 low and during that same stretch the share price of ALEF increase by almost 71%. As we can see, the share prices are moving in tandom. Because there is no merger until there is a merger (ie: not until the deal is done and closed), there will be a discprenacy. Also, as time advances, the spread between the share prices will move closer to the 0.8377 transaction offer where each share of EMC will be exchanged for 0.8377 shares of ALEF when the merger closes. With closing share prices on January 25th of $1.46 (EMC) and $2.12 (ALEF) the spread infers, what CannaInvestor termed, a near arbitrage opportunity exists because $1.46 / $2.12 = 0.68868. This can be based illustrated by example.
A $10,000 investment in ALEF at a $2.12 share price would buy 4,716
shares ignoring transaction fees in this example.
That same investment in EMC at $1.46 shares would buy 6.849 shares. When the merger closes, those 6,849 shares will be converted to 5,737 (6,849 x 0.8337) shares of ALEF. That is 1,021 (22%) more shares in ALEF then if the investor had bought the ALEF shares.
So long as the share price spread (as a decimal or percentage) is less than the stated conversion rate, such opportunities may exist. One can check that gain % by using the difference between the conversion rate and the spread divided by the spread. In this example, 0.8377 – 0.6887 = 0.145. 0.15 / 0.6887 = 22%.
would buy 6.849 shares. When the merger closes, those 6,849 shares will be converted to 5,737 (6,849 x 0.8337) shares of ALEF. That is 1,021 (22%) more shares in ALEF then if the investor had bought the ALEF shares.
So long as the share price spread (as a decimal or percentage) is less than the stated conversion rate, such opportunities may exist. One can check that gain % by using the difference between the conversion rate and the spread divided by the spread. In this example,
Aleafia Health Inc
TSXV:ALEF; OTC:ALEAF
As at January 25, 2019
Net Shares Outstanding: 157,848,81
(www.tmxmoney.com)
Share Price: $2.12
Market Cap: 334,639,481
https://www.aleafiainc.com/
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