Cannabis SPACs See Red

The Daily Dish (09/24/21)

Cannabis Focused SPACs Struggle to Source Deals 

US SPACs seeking targets in the cannabis industry are struggling to source deals and are instead merging into unrelated industries. With the Democrats gaining slim control of both houses of Congress, there were hopes that the recreational use of marijuana would be legalized soon.

This euphoria has led to 18 cannabis-focused SPACs raising approximately $3.3 billion by August. But with congress making little progress on cannabis regulation, Cannabis focused SPACs have withered.

Companies that have yet to finalize deals may run into trouble, like HERBL, which had to cut its valuation in recent months during merger talks with BGP Acquisition Corp. All but one cannabis company listed in the United States through SPACs since 2020 are trading below the $10 per share IPO price.

By comparison, 46.5% of all SPACs are trading higher post-merger. A scarcity of large target companies in the sector is also forcing SPACs to buy into unrelated sectors. 5 of the 18 Cannabis-focused SPACs have mergers with target companies in unrelated industries.

Cathie Wood Buys DraftKings Dip 

Two ARK-managed ETFs have purchased an additional $40 million stake in DraftKings after news of a buyout bid for UK sports bettor Entain sent shares spiraling down 8.2%. Ark Invest now has 14.2 million shares of DraftKings through its Innovation and Next-Generation ETFs.

On Tuesday, news outlets reported that DraftKings had approached Entain with a $20 billion cash and stock buyout offer, months after the UK-based firm had rejected an $11 billion buyout from MGM resorts. The news propelled Entain shares up 18% but crushed DraftKings stock.

DraftKings has attracted interest from short-sellers claiming exposure to black-market operations stemming from the SPAC, but the company has denied the allegations.

General Wall Street consensus on the stock remains positive, with 17 of the 25 analysts covering the stocks calling it a buy.

Reddit Reads

LATN Shareholders Approve SPAC Merger with Procaps Group 

Union Acquisition Corp II announced that shareholders voted to approve the SPAC deal with Procaps Group, a leading integrated international healthcare, and pharmaceutical company. Approximately 97% of the votes cast at the meeting were in favor of the transaction, with the companies agreeing to close the transaction before September 30, 2021

IRNT SPAC Squeeze Likely Over 

PIPE Lockup is now over, with warrants available at an $11.5 strike price. The massive dilution will ensure that the current run-up in IRNT won’t last long.

Investor Targets GigCapital-UpHealth SPAC Deal

A Former shareholder of GigCapital has filed lawsuits against co-founder Avi Katz and his wife, alleging that the transaction involving the SPAC ripped off investors as they were ripe with conflicts of interest.

The transaction between GigCapital and UpHealth closed back in June, but shares have tumbled more than 60% with the company being one of the worst-performing post-merger SPAC.

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