The year has been a roller coaster for Scythian Biosciences Corp (CNSX:SCYB). Generally, the company has experienced one of its longest bear runs, with their share price experiencing a consistent drop. Throughout this period, the company’s management had shared little to no information with the market regarding their projects or how they expected to boost shareholder value.
Things, however, seem to have changed for the better.
Over the past month, the company seems to be making a series of acquisitions. Initially, as with all acquisitions, the market presumed that they were meant to boost their synergies over the long-run, however, this seems to have benefited them even in the short-run as they have further opted into a share repurchase, signaling the increased cash flow to the firm. As a result, the firm’s share price has been on an upward trajectory ever since. The share has not missed the green zone over this past week and seems to continuously stick here.
Investors can view the two price action charts below which further elaborate this price movement:
With the above being the case, we have chosen to evaluate the company and the above news emanating from their management over the past month so as to understand how it will impact the company going forward. Further, we have come up with the report below to give readers a synopsis of the expected performance of the company and therefore the company’s share price.
SCYB: Then till Now
As with most of the cannabis companies in the market, Scythian Biosciences Corp is a Vancouver-based firm which was founded back in 2005. The company is a U.S. focused cannabis company with an international presence.
Over time, it has strategically partnered with the University of Miami to ingrain itself within the different cannabis-related fields: research and development, cultivation, distribution, and retail. Through this approach, the firm believes that it is at the forefront of this cutting-edge industry and expects that its medical and academic approach towards the sector is bound to ensure that they remain at the helm of it.
Currently, the firm has opted out of their already existing South American assets – where the firm was based previously – and opted to focus on the U.S. Therefore, they are not only selling their existing stake in South America but also looking to change their name to SOL Investments Corp upon receiving approval from shareholders so as to cement the above shift.
As previously stated, there have been two key developments in the company: the series of acquisitions they have made as well as the share repurchase which recently happened. These acquisitions follow the firm’s strategic shift which is expected to see them venture out of their South American portfolio as they have been doing – they have already sold off $193 million of their South American stake.
In this section, therefore, we shall evaluate both of these and analyze their short and long-term impact on the company’s share price.
MMJ Columbia Partners Acquisition
As previously stated, Scythian Biosciences Corp is now focused on the U.S. This follows their recent strategic shift which is expected to see them venture out of South America as a way to grow their market base as well as their market share. MMJ Columbia Partners provided them with the platform to do just this.
MMJ Columbia Partners is a private Ontario-based company which owns 90% of Colcanna SAS. Colcanna SAS, in turn, operates in the entire production line of cannabis within Columbia and controls a significant share of the operations within the region.
As a result, the company opted to structure the deal as follows: a cash consideration of $6.2 million as well as the issue of 6,679,310 common shares at a price of CDN $3.6381 per share. Moreover, they have assumed liability of the firm’s $5 million debt in the process.
Marigold Projects Jamaica Acquisition
Scythian Biosciences Corp has also opted to acquire the Marigold Projects through the acquisition of Marigold Acquisitions Inc, a British Columbian firm. As a result, they now own 49% of the firm – indirect control of the vehicle.
The acquisition will see them issue 6 million shares at a price of $3 per share. Like the previously mentioned acquisition, this will also be among the final transactions the firm is involved in after their strategic shift led them to decide to venture out of South America and the Caribbean.
As at last week, SCYB announced their intention to continue with a normal course issuer bid which would see them repurchase 5% of their share capital. It is the firm’s belief that the current share price didn’t fully reflect the firm’s value, therefore, the share repurchase was necessary.
Financially, a share repurchase is among the methods used to signal to shareholders a firm’s financial strength. Through it, a firm signal’s either lack of investments which would boost their return or excess cash in their reserves. The latter, similar to dividends, is a way to pay your shareholders for their investment which ensuring the current shares trade at a premium. As a result, the repurchase has been pivotal at signaling good tidings both presently and in future.
SCYB has been making a series of acquisitions meant to ensure they venture out of the South American region. As a result of retiring these assets, they are expected to make $193 million. Through this, the firm expects that they will benefit from their entry into the U.S. market which presents an enormous opportunity. As such, the firm presents a buy for long-term shareholders.
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Disclosure: We have no position in SCYB and have not been compensated for this article.