Shares of Aleafia Health took a sharp decline on Monday after its planned takeover by Red White & Bloom Brands was cancelled. The shares dropped by 20% to C$0.02 in morning trading, bringing its total decline for the year to 69%.
Both the Canadian cannabis company and the U.S. cannabis operator announced on Friday afternoon that their agreement to merge had been mutually terminated. The termination comes with no cost liability for either company.
Aleafia Health, which has experienced a series of losses and has expressed concerns about meeting financial obligations and maintaining liquidity for ongoing operations, stated that disinterested members of its board are actively exploring potential strategic alternatives.
The now-terminated deal between Red White & Bloom and Aleafia would have exchanged each outstanding Aleafia share for 0.35 of a Red White & Bloom share. This transaction would have allowed existing shareholders of the U.S. company to own approximately 76% of the combined company. The intention behind the deal was to reorganize Aleafia’s balance sheet and provide the company with exposure to both the U.S. recreational and medical cannabis markets.