Ceres Acquisition Archives - Green Market Report

Debra BorchardtJuly 1, 2022
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SPACs (Special Purpose Acquisition Corp.) were the hottest thing going on in the cannabis industry for the past couple of years, but the buzz may be wearing off. These SPACs would raise millions and then search for a “qualifying transaction.”  In other words, the money was looking for a company to essentially buy and take public. It was an easy way for cannabis companies to get investor money and quickly become publicly-traded stocks. However, these deals frequently turned sour for the secondary buyers dampening the interest.

Plus, the millions raised didn’t sync well with the size of the companies available to be a target. For example, a SPAC may raise $100 million and then pick a company that maybe did $10 million a year in revenue. Suddenly this small company was given a very rich valuation because the SPAC didn’t have much to choose from. In the beginning, this anomaly was overlooked, but investors began to become a little more discerning. One thing unique about SPACs is that investors can pull out of a deal if they think the numbers just don’t look so great. Jumping ship at the last minute can often throw a SPAC into disarray. Another unique feature of SPACs is the tight time constraints. The SPAC has only so much time to identify a target and then execute. Being forced to add more time to the clock is also a signal of trouble.

Northern Lights

This week, the Northern Lights Acquisition Corp.  (Nasdaq: NLIT) SPAC had to push back its plan to use Safe Harbor Financial as its qualifying transaction. The vote had been planned earlier this week, but now has been pushed back to July 29 with the ability to extend even further to August 31. The business combination was approved by the company’s stockholders at the special meeting of stockholders held on June 28, 2022. Northern Lights said that stockholders who had previously submitted redemption requests in connection with the closing of the could ask that those redemption requests be reversed. In other words, if they chose to bail out of the deal, Northern Lights said they could change their minds. As of June 22, 2022, the company has received redemption requests for 11,416,205 shares of Class A Stock in connection with the Business Combination.

Ceres Acquisition

On Thursday, Ceres Acquisition Corp. (OTCQX: CERAF) announced that it was also extending its timeline to complete a qualifying transaction to December 16, 2022. The Extension was previously approved at a special meeting of the holders of Class A Restricted Voting Shares of Ceres held on June 22, 2022. Ceres’ board of directors has also approved the Extension, which is effective as of June 30, 2022. this isn’t the first-time, the SPAC has pushed out its timeline. Ceres’ final prospectus for its initial public offering was originally dated February 25, 2020, but then the Permitted Timeline was automatically extended from December 3, 2021 to March 3, 2022 and was further extended with the approval of the Class A Restricted Voting Shareholders to June 30, 2022.

Ceres was going to do a deal with Parallel, but that got called off when the company’s finances came under question. Now Ceres says that it believes that it “has identified a number of promising targets and is currently evaluating the business of these prospective targets and engaging in active discussions with an aim towards announcing an exciting qualifying transaction for Ceres’ security holders in the near future.”

 


StaffJune 30, 2022
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Editors Note: This was republished with permission from Crain Chicago and written by John Pletz.

The owner of Windy City Cannabis shops wants Beau Wrigley to pay $80 million in damages for a sale that never closed.

William “Beau” Wrigley Jr., who is already facing lawsuits over dreams of a marijuana company’s initial public offering that went up in smoke, is fighting a request for arbitration in a deal to buy a half-dozen Chicago-area pot shops that also vaporized.

Wrigley, who resigned last year as CEO of Atlanta-based marijuana company Parallel, filed suit in federal court in Chicago this week, asking a judge to declare that he shouldn’t be included in arbitration over the failed deal by Parallel to buy six Windy City Cannabis stores for $100 million. (Read the lawsuit below.)

The deal has been in limbo for more than a year. Since then, the market for cannabis stocks has cratered, pushing down the value of marijuana businesses. The state also has held lotteries to issue 185 new dispensary licenses, further undercutting the value of marijuana shops.

Parallel reached a deal in April 2021 to buy Windy City Cannabis shops, which were owned by Steve Weisman and Weisman Holding. It was one of several deals that were supposed to culminate in the IPO of Parallel later that year through a merger with a special-purpose acquisition company, or SPAC, called Ceres Acquisition (OTC: CERAF).

The SPAC deal fell apart and Wrigley later resigned as CEO and chairman of Parallel amid a cash crunch. Investors in Parallel have sued in Florida and New York, saying they were misled about the financial health of the company.

Windy City Cannabis is not the first marijuana deal to blow up, underscoring the Wild West nature of a nascent, fast-moving industry where entrepreneurs have both made and lost fortunes.

PharmaCann, one of the four big multistate marijuana companies based in Chicago, planned to sell to MedMen for $682 million in 2018, but the deal fell apart. Verano Holdings’ deal in 2019 to sell to Phoenix-based Harvest Health & Recreation for $850 million also came undone.

Verano later went public, but PharmaCann has struggled to keep up with Chicago-based peers, such as Green Thumb Industries and Cresco Labs, which are among the largest players in the industry.

Several smaller players have been sold for tens of millions of dollars in the past year.

Windy City was an even bigger prize. After two waves of consolidation, Windy City is one of the few remaining companies in Illinois with multiple licenses that could give an acquirer the ability to enter the Illinois market with enough scale to compete with Cresco, GTI, Verano and others who hold the maximum 10 retail licenses allowed by law.

But Windy City’s deal, which was supposed to close by April, remains up in the air. Parallel hasn’t come up with the money to complete the deal, nor has it been able to get approval from state regulators to transfer the retail licenses.

One of the challenges, according to a related lawsuit filed in Cook County Circuit Court by Weisman, is the ownership by Wrigley, who was CEO of Chicago-based Wm. Wrigley Jr. until its 2008 sale to Mars for $23 billion, then moved to Florida and got into the pot business in 2017. Although he’s no longer CEO, he’s the largest shareholder in Parallel, according to the litigation. However, the ownership stake involves at least one trust, something that’s prohibited by state regulations.

Wrigley, who was the subject of a Forbes profile just two months before announcing the Windy City deal, was the face of the company until November, when he resigned as CEO.

Now he’s trying to distance himself. In the federal court filing, Wrigley says he was not a party or signatory to the purchase agreement for the Windy City stores and did not act as an agent to Parallel or a related company. According to his filing, Windy City attempted to include him in the arbitration in which it’s seeking $80 million, alleging Parallel and its parent company SH Holdings are the “alter ego of Wrigley such that he should be personally liable for any damages.”

This story has been updated to correct the court where Beau Wrigley filed suit to federal court, not Cook County Circuit Court.

 


Debra BorchardtOctober 1, 2021
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Ceres Acquisition Corp. (NEO: CERE.U)(OTCQX: CERAF) has decided to call off the Business Combination Agreement dated February 21, 2021, with SH Parent, Inc. also known as Parallel. Ceres said it plans to continue looking for another company for its qualifying transaction before the deadline of March 3, 2022, unless of course that date is extended, with shareholder approval.

Premium Price

Back in February, the deal was valuing Parallel (formerly Surterra Wellness) at an implied enterprise value of $1.884 billion saying the expected net revenues would $447 million in 2021. The expected pro forma cash on hand was to be $430 million at the close, including the $225 million from the PIPE and $120 million of cash held in Ceres’ escrow account assuming no redemptions. At the time, the deal was expected to close in Summer 2021.

Parallel has ongoing operations in four medical and adult-use markets with approximately 50 locations nationwide, including 42 retail stores, and cultivation and manufacturing sites. The company has retail brands using the name Surterra Wellness in Floridagoodblend in Texas; New England Treatment Access (NETA) in Massachusetts; and The Apothecary Shoppe in Nevada. Parallel also has a license under its goodblend Pennsylvania brand for vertically integrated operations and up to six retail locations, in addition to a medical cannabis research partnership with the University of Pittsburgh School of Medicine. Subject to regulatory approval, Parallel said it will add Illinois as a sixth market when its announced acquisition of six Windy City Cannabis licenses is complete.

No Confidence

Reuters reported that “several investors had lost confidence in Parallel’s ability to deliver on lofty financial projections it provided in February when the merger was announced.” With just 42 stores and in some small markets like Texas, the ability to deliver more revenue than companies twice its size had to give investors pause. Reuters also reported that several investors who had committed to the $225 million private investment had refused to invest over the following months. Since Parallel is a private company, actual revenue figures aren’t disclosed. If one estimates Parallel’s revenues and Parallel doesn’t like it, get ready to hear from their lawyer.

 

 


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