A roundup of some of the North American equities making moves in both directions today
On the rise
Aphria Inc. (APHA-T) and rival Tilray Inc. (TLRY-Q) rose in the wake of announcing their intentions to merge, creating the world’s largest cannabis producer by sales and giving it a foothold in the fast-growing U.S. market.
Like several of the North American producers to emerge in recent years, Aphria and Tilray have struggled to fulfil the expectations created by Canada’s move to legalize cannabis use fully last year.
Joe Biden’s win in the U.S. presidential election and state level reforms, however, have renewed hopes that the U.S. market is finally ready to open up, boosting deal-making in the sector. .
The reverse merger with Tilray will see Aphria shareholders get 0.8381 shares of Tilray for each Aphria share they own, while owning 62 per cent of the combined company, which on a pro forma basis had revenue of $874-million in the last twelve months.
After the merger, Tilray will continue to trade on Nasdaq with Aphria becoming a private unit, and Aphria CEO Irwin Simon leading the combined company.
Rivals Aurora Cannabis and Canopy Growth have also made deals to establish supply routes and a path for full U.S. entry if and when Federal rules allow.
Aphria itself bought U.S. craft brewer SweetWater Brewing for $300-million last month, giving it a possible future distribution point south of the border.
ll no longer need to purchase wholesale cannabis from other producers.
The combined company will also be able to increase output of branded edibles and beverages, which have been in heavy demand during lockdowns.
First Cobalt Corp. (FCC-X) soared after it said on Wednesday it has secured $10-million in government loans and grants, allowing it to accelerate startup and expansion of North America’s first cobalt refinery.
Cobalt is crucial for the lithium-ion batteries used in the fast-growing electric vehicle sector, and the financial backing is the latest bet on the burgeoning industry by the Ontario and Canadian governments.
First Cobalt’s cobalt refinery in Ontario could also ease North America reliance on China, which dominates the supply chain for rechargeable lithium-ion batteries.
Under Wednesday’s deal, Canada will provide a $5-million interest-free loan to First Cobalt while the Ontario government will give the company a $5-million non-repayable grant.
Lyft Inc. (LYFT-Q) rose after announcing with Motional, a joint venture between Korean automaker Hyundai Motor Co and auto supplier Aptiv Plc, that they will launch a multi-city U.S. robotaxi service in 2023.
The driverless vehicles will be provided by Motional and will be based on a Hyundai platform.
The vehicles will be deployed in Lyft’s ride-sharing network in the United States, the country’s second-largest after that of Uber Technologies Inc.
While the Lyft-Motional partnership is non-exclusive, the companies have been working together for three years on a pilot program in Las Vegas.
They join Waymo, a unit of tech titan Alphabet Inc , which operates a commercial robotaxi service in Phoenix. Lyft previously has deployed Waymo’s driverless vehicles in its Phoenix ride-sharing network.
Lyft and Motional did not specify which cities they will serve first or say how many driverless vehicles will be deployed.
Two other robotaxi developers, Cruise and Argo, continue to test self-driving vehicles in several U.S. cities but have yet to launch commercial services.
Cruise is majority-owned by General Motors Co with Japan’s Honda Motor Co as a minority shareholder. Argo’s two principal shareholders are Ford Motor Co and Germany’s Volkswagen AG.
Montreal-based DavidsTea Inc. (DTEA-Q) was up after announcing Sarah Segal, the CEO of candy retailer Squish, is taking over from her father as head of the insolvent tea company.
Ms. Segal becomes chief executive of the Montreal-based company on Wednesday while chief financial officer Frank Zitella becomes president. DavidsTea co-founder Herschel Segal is stepping down as interim CEO but will remain board chairman.
The executive changes were announced Tuesday as the company reported its second-consecutive quarterly profit.
It earned $14.5-million or 54 cents per share in the third quarter, compared with a loss of $10.8-million or 42 cents per share a year earlier.
The adjusted profit was $2.3-billion or nine cents per share, versus an adjusted loss of $8.8 million or 34 cents per share in the third quarter of 2019.
Revenues for the three months ended Oct. 31 decreased 33.6 per cent to $26.2-million, from $39.5-million.
“Our shift towards e-commerce and wholesale continues to progress above our expectations and our latest results clearly indicate that we are making good progress,” said Ms. Segal, who had been a board member between 2012 and 2017 and CEO of Squish since 2013.
Shares of Upstart Holdings Inc. (UPST-Q) jumped 30 per cent in their market debut on Wednesday, giving the cloud-based artificial intelligence (AI) lending platform a market capitalization of US$1.88-billion.
Upstart’s shares opened at US$26 on the Nasdaq, above their initial public offering (IPO) price of US$20 per share. The firm had raised US$240.4-million in its IPO on Tuesday.
The AI-based lender had planned to sell 12.02 million shares priced between US$20 and US$22 apiece.
A recent regulatory filing by the fintech company showed it earned a surprise profit of US$4.96-million on a revenue of US$146.7-million in the nine months ended Sep. 30.
The fintech company counts Khosla Ventures, Third Point Ventures and First National Bank of Omaha among its investors.
Upstart’s business has been affected by the COVID-19 pandemic, the filing showed, as loan origination volumes on its platform fell and availability of loan funding from institutional investors reduced.
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On the decline
Vancouver-based miner Equinox Gold Corp. (EQX-T) was down after announcing on Wednesday it would buy Premier Gold Mines Ltd. (PG-T) in an all-stock deal valued at $611.7-million and simultaneously spin-out Premier’s U.S. production assets.
The deal is worth about $2.57 per share, which represents a 2-per-cent premium to Premier’s Tuesday close, as per Reuters calculation. However, the exact value that Premier shareholders will get depends on the pricing of the spin-out company’s shares.
Deal making has picked up in the industry as gold prices have hit a record high of above $2,000 an ounce this year as a slowdown in economic activity and surging coronavirus cases boosted demand for the precious metal.
On Tuesday, private equity firm Orion Mine Finance Group had entered into an agreement to buy gold miner Centerra Gold Inc.’s (CG-T) 50-per-cent interest in the Greenstone Gold Mines partnership for $225-million in cash. Premier Gold has a 50-per-cent stake in the partnership.
Centerra shares were also higher.
Premier shareholders will receive 0.1967 of an Equinox share for each share held and 0.4 of a share in the spin-out company i-80 Gold Corp, the companies said on Wednesday.
Upon deal closing, Equinox Gold will own about 84 per cent of Equinox Gold and Premier shareholders about 16 per cent. Equinox Gold and the existing shareholders of Premier will own 30 per cent and 70 per cent of i-80 Gold, respectively, on an issued share basis.
The transaction is expected to close in the first quarter of 2021.
Air Canada (AC-T) dropped after saying late Tuesday it looks to raise about $850-million in a share offering, after it warned of more cash burn in the fourth quarter as spiking COVID-19 cases do more harm to air travel and the airline’s liquidity.
The airline industry is still losing billions of dollars every month due to weak travel demand, exacerbated by recent coronavirus travel advisories that have discouraged holiday travel.
United Airlines, Delta Air Lines and American Airlines also raised their cash burn expectations earlier this month.
Air Canada expects average net cash burn of between $14-million and $16-million per day in the fourth quarter, compared with its prior estimate of $12-million to $14-million.
The company said it intends to grant underwriters an option to purchase up to an additional 15 per cent of the shares in the offering, the proceeds of which will be used to bolster working capital.
U.S. airline stocks also fell after Southwest Airlines Co. (LUV-N) flagged a higher cash burn in the fourth quarter, as well as increased trip cancellations in December.
Southwest now expects average daily core cash burn to be about US$12-million in the fourth quarter, up from a previous estimate of between US$10-million and US$11-million.
Several U.S. airlines have raised their daily cash burn forecast due to this year’s coronavirus-driven collapse in travel, as a batch of new lockdowns and advisories discourage Christmas and New Year flying.
As well, an equity analyst at JPMorgan downgraded United Airlines (UAL-Q), JetBlue (JBLU-Q) and Spirit Airlines (SAVE-N) by two levels to “underweight” from “overweight.”
Aurora Cannabis Inc. (ACB-T) fell in the wake of saying it is laying off 214 workers and its chief science officer is retiring, the latest of a series of cuts to hit the Edmonton-based cannabis company.
Aurora spokeswoman Michelle Lefler says in addition to the layoffs, operations at the company’s Aurora Sky facilities will be reduced by 75 per cent.
Ms. Lefler says the move will help the company focus on its “premium flower product” at the site.
Chief science officer Jonathan Page will be retiring and will assume an advisory role to help with the transition.
The company previously announced it would pause operations at its Aurora Sun facility, with the shutdown affecting 30 workers.
Ms. Lefler confirmed that facility would be wound down on Dec. 18.
Gilead Sciences Inc. (GILD-Q) dipped after it said on Tuesday it had decided not to pursue the U.S. Food and Drug Administration’s approval for its experimental rheumatoid arthritis treatment, filgotinib, following a meeting with the health regulator.
The FDA in August declined to approve the drug for rheumatoid arthritis after weighing the overall benefit of the 200 mg dose of the treatment against its risk profile.
Gilead said it had concluded that the 200 mg dose of the drug was unlikely to receive a U.S. approval without conducting additional clinical studies.
Last year, Gilead invested US$5.1-billion in a major expansion of its partnership with Belgo-Dutch biotech Galapagos NV , banking on the potential of filgotinib and other drugs in development.
The two companies have now amended the pact, with Galapagos assuming sole responsibility in Europe for the drug, where it has been approved for treating moderate to severe forms of rheumatoid arthritis.
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The parent company of Wish, a shopping app that sells cheap clothing, toys and electronics, sputtered in its stock market debut.
Shares of ContextLogic Inc. fell in afternoon trading Wednesday. The stock is trading on the Nasdaq Stock Market under the symbol “WISH.”
Founded a decade ago, Wish positions itself as an affordable alternative to Amazon and other online stores, targeting shoppers who make less than US$75,000 a year. Most of what it sells comes directly from Chinese merchants, who list their goods on the app. Wish said it has 100 million customers around the world, mostly in North America and Europe.
ContextLogic raised US$1.1-billion in its initial public offering, selling 46 million shares at $24 apiece, valuing the San Francisco-based company at more US$16-billion. It plans the use the money raised to grow its business and may buy other companies or technologies.
It’s been a blockbuster year for IPOs, with a record number of companies raising more than a $1 billion, including food delivery company DoorDash and home rental business Airbnb. Unlike Wish, shares of those companies soared in their debut.
With files from staff and wires
David Leeder