Shares of Emblem Corp (OTCMKTS:EMMBF) are powering higher in response to a confirmation that the company is an acquisition target for Aleafia Health Inc (OTCMKTS:ALEAF). A 50% rally has come on reports Aleafia is willing to acquire Emblem in an all-stock deal that values it at $128 million, representing a 27% Premium.
Emblem Corp Price Analysis
The acquisition bid has helped strengthen the stock’s sentiments in the market after one of the worst routs in recent years. The stock has come under immense short selling pressure, depicted by a 50% plus slide in 2018. The stock had resorted to trading in a downtrend with pullbacks emerging as sell-off opportunities, from where short sellers continued to push the stock lower.
The announcement that Emblem was in the process of launching a new line of Oil Capsules did little to strengthen the stock sentiments in the market. The stock slid below the $1 a share mark as bears remained in firm control.
Fast forward, renewed investor interest on the acquisition bid has helped strengthen the stock’s sentiments in the market fuelling an upward run. Awaiting a merger with Aleafia Health, Emblem has bounced back above the $1 a share level.
After the recent spike, the stock is staring at key resistance at the $1.50 mark. As the negotiations continue, the stock looks set to make a run for the resistance level. A rally followed by a close above the critical resistance level should open the door for the stock to make a run for one-year highs.
A collapse of the acquisition talks would be catastrophic for the stock as it could fuel a sell-off of the stock. Immediate support on any sell-offs is at the $0.90 mark, below which the stock would be at the mercy of short sellers.
What Does Emblem Corp Do?
Emblem Corp bills itself as a fully integrated cannabis company that produces, distributes and sells medical cannabis derivatives. The company is also an operator of medical cannabis education centers that provide education services touching on medical cannabis treatments.
A spike in share activity, as well as trading volume, follows the announcement that Aleafia Health is planning to acquire Emblem Corp to create a new medical cannabis leader. A merger of the two companies will result in the creation of one of the largest medical cannabis clinic network with over 40 medical clinics.
In addition to strengthening Aleafia global distribution platform, the merger will enhance the combined company’s capital market profile as well as trading liquidity with cash resources of more than $70 million. The merger will also result in a combined company with an annual production capacity of 138,000 Kg worth of marijuana.
“Emblem’s patient-focused product portfolio and strength in patient education, conversion, and retention through GroupWise will be further bolstered by the patient acquisition capabilities of Aleafia’s Canabo clinics. The combination of the companies will form a fully integrated market leader in the medical cannabis sector, with industry-leading patient counts, and the ability to capitalize on full revenue potential immediately,” said Emblem CEO Nick Dean.
Product Line Strengthening
Emblem goes into the deal fresh from announcing the launch of a new line of 10mg oil capsules poised to strengthen its medical cannabis product line. The convenient capsules are designed to help patients better manage their treatment through precise dosing of medical cannabis.
The new oil capsules are available online through Shoppers Drug Market and directly through the company’s official Website. The company intends to issue additional dosage strengths of oil capsules to address the medical needs of new patients further.
“Patients want access to medical cannabis in formats that are discreet and easy-to-use, with established dosing. The precision found in Emblem’s Oil Capsules addresses this and allows patients to easily track their medication and adjust as needed while giving healthcare professionals another mode of administration that resembles traditional medications,” said Wayne Kreppner, President of Medical, Emblem Corp.
Emblem Corp has received a significant boost on experiencing sharp swings ups and down in 2018. The stock has since bounced back thanks to the 27% premium on the acquisition price. The acquisition talk is already priced in the share price. That said it might be wise to wait for further catalysts as well as the outcome of the ongoing merger talks before considering the next case of action concerning Emblem Corp.
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Disclosure: We have no position in EMMBF or ALEAF and have not been compensated for this article.