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Emerald Health (EMH.V) gives rich fellows 12% discount in desperate lunge at cash

As a man of wealth and means, I don’t buy stock in the same manner as you miserable peons, haggling on the street corner for the scraps the wealthy discard. If I’m going to buy a piece of a company, I’m going to the company directly and waving my filthy lucre in their face.

Me: “You want this? Punch yourself in the face for it.”

CEO:

If you were interested in buying a share of Emerald Health (EMH.V) this morning, you people would have to pay $0.65 for the pleasure of doing so. On the other hand, us men of means, us captains of industry, us barons of wealth… we get to skip the queue, and get a 12% discount for the privilege.

Emerald Health Therapeutics Inc. has entered into a binding term sheet with a single Canadian institutional accredited investor under which the investor has agreed, subject to certain customary conditions, to purchase 4,385,965 units of Emerald at a price of 57 cents per unit for total gross proceeds of $2.5-million.

Each unit will comprise one common share of Emerald and one common share purchase warrant.

Yep, that’s a full warrant into the bargain. Not a half warrant, like you’d normally get, but a full warrant.

Of course, when the deal was announced to Johnny Lunchpail, the stock was instantly repriced to the lower price.

Understanding how this deal came to be, one must look into the shareholder agreement of the joint venture agreement between Emerald and Village Farms.

Emerald is due a payment to the JV, which is frankly the only thing they have generating significant revenue, and they don’t have the cash to make it. If they should default on that payment, Village Farms has the option of increasing their stake into a controlling interest, or paying on Emerald’s behalf and receiving a prime plus 15% interest rate on the debt.

So, Mr CEO? Punch yourself in the face.

Of course, there’s not much wrong with a company in a severe financial crunch taking expensive financing, even if it means getting kicked in your Boris Johnson as part of the exercise. One must do what one must do.

But if you’re the little guy, the chap with a few thousand dollars in net worth, who has put your divorce settlement leftovers into EMH hoping they’ll double your investment, they just shaved 12% off your wealth in a morning.

In contrast, Village Farms raised $28m in October at basically the exact same price their shares were selling at. If you’re going to bet on two poker players, always go for the tall stack.

The falling knife cuts deep, children.

— Taint

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