The Safe Banking Act held a hearing last week on tuesday AKA the SAFE (Secure and Fair Enforcement) Banking Act. This act was passed on March 26, 2019 by the House Committee. If this act passes the senate, then it will be sent to the president Donald Trump to give the final approval.
President Donald Trump was asked by reporters during before his flight to the G-7 summit in Canada about the bill regarding marijuana. He told them that “I support Senator Garner. I know exactly what he’s doing. We’re looking at it. But I probably will end up supporting that, yes.”. Just like that, Donald Trump is giving huge approval for the SAFE act. There is no reason why he wouldn’t especially since this would bring additional revenue to the USA and it would mean access for more funds to go into marijuana businesses.
Currently, marijuana is considered a “Schedule I” drug in the USA. It is estimated at $10.4 billion in 2018 and has 250,000 jobs devoted to the handling of plants. There are ten states that have legalized marijuana for recreational use and there are 33 states that have legalized it for medical use.
In 2019, New York, New Jersey, Illinois, and Connecticut are up next for legalizing marijuana. Illinois actually just recently passed the act and it will become legal for recreational usage on January 1, 2020. Illinois is also the home of the headquarters of Cresco Labs (CRLBF).
Cresco Labs Inc. (CRLBF) is a publicly traded US cannabis company. They have been very active acquiring and merging with multiple companies to become a powerhouse in the marijuana industry. They hold dispensaries for wholesaling the products and retail stores to sell recreational use and medical use of marijuana.
Earlier this year in April 1, 2019, Cresco Labs Inc. made a partnership to merge with CannaRoyalty Corp. d/b/a Origin House (ORHOF) for an all stock transaction where holders of common shares of Origin House would receive .8428 subordinate voting shares of Cresco Labs for each Origin House share.
However, the merger had a hurdle with the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 which required Cresco Labs to file a notification with the U.S. antitrust authorities and observe a waiting period before completing the transaction. This also gives the U.S. time to review the merger and require certain conditions to allow the acquisition to occur.
On July 26, 2019, Origin House annouced the sale of AltMed where it owned a 5.1% equity interest. Cresco Labs Inc. is prohibited under state law from acquiring additional positions in the Florida market therefore this was part of the conditions to allow the acquisition to occur.
On the closing of July 26, 2019, Origin House closed at a price of $4.79. If the merger were to happen today, a single share of Origin House would convert to .8428 of a Cresco Lab share which would be $6.93. This would mean your stock value would increase 45%!
Right now, you have an amazing and rare opportunity to acquire Origin House shares at a really lucrative arbitrage opportunity with Cresco Labs. This could not have occurred with the U.S. antitrust authorities intervening with the transaction. There are many investors that sold out not being patient with this investment but also not believing that the merger will happen.
On July 17th, Curaleaf Holdings (CURLF) acquired Grassroots for a value of $875 million. Origin House only has a market cap of $331 million. Cresco Labs has an opportunity to use the acquisition by Curaleaf Holdings as an argument to acquire Origin House to remain competitive if the U.S. antitrust authorities still have issues with the transaction.
This is a great opportunity to go long in the marijuana industry. Even if the acquisition does not go through, Origin House will most likely succeed on their own or be acquired by another company as the cannabis industry continues to mature in the future.