Cronos Group Inc. (CRON.TO)

CAUTION this stock was manipulated against the timing of the 2021 Banking Act. This act makes legit Cannabis companies eligible for normal relations with banks. Such a thing demonstrates how the Congress and Senate will vote for legalization and that this step was a precursor. Its very much going to happen.
Senate voted once, bill looks like it will pass. So the big guys had to cheat and drive the prices down down down to hurt investors. Now I see why Cron has to run fast and hard, when it turns. The slow slow slow downs are in unison with short covering. Making it easy for them. Stinks, right?

"indefinite-lived intangible assets in the Company’s U.S. reporting unit for impairment." While there seems to be an opportunity to write down $ impairments costs (possibly covid-related like many other companies), seems strange they never set an earnings release date and Call. They never responded to emails asking for release date as well. I am long, this is my 5th time back long.. this is my largest position so I am bias but it appears MO is buying a little time. The new Chief innovation officer, formerly with Altria Israel, is all about Vaping, MO now has 4 Vape devices patented.. its quite possible MO is close to a reorg involving JUUL and CRON. MO I believe has completely written off JUUL on paper losses. A reorg could also involve PMI. With Juul and Iqos problems the Cron Brands along with MO brands ( Marloboro etc,) may take the lead utilizing all others as production and distribution networks. Thoughts on Mega-deal?

With sentiment perhaps as low as it can be, we think a big M&A deal could be in the works, with Altria potentially buying the remaining shares outstanding of Cronos Group. This is an idea we have been discussing with subscribers at our 420 Investor premium service for several months now, and we think it makes a great deal of sense. Predicting the timing of such a transaction, though, is always a challenge. Before we explain why we think this could happen next week, we will discuss the history and detail our rationale for the deal.
History

It was almost three years ago that Altria announced its strategic investment into Cronos Group: Altria Buys 45% of Cronos Group for C$2.4 billion with Option to Take Controlling Stake

The deal, which closed in March of 2019, infused the company with approximately US$1.8 billion, with Altria paying C$16.25 (about US$12), a price that was characterized as a 41.5% premium to the 10-day volume-weighted average price as of November 30, 2018. Altria also acquired warrants at C$19 that would give it majority ownership if exercised. Additionally, it took control of the Board of Directors. Altria made Cronos Group its exclusive partner for pursuing cannabis opportunities globally.

Since the deal has closed, the companies have seemingly worked very well together, though both have seen their shares decline since the announcement:

The warrants that Altria holds are now out of the money, as Cronos Group is trading at 65% below the C$19 exercise price, and they expire in just 16 months.

Why the Deal Makes Sense

We believe that Cronos Group is a good strategic fit for Altria, which continues to look beyond tobacco for growth. With a quarter remaining in 2021, Altria is expected to generate revenue of $21.6 billion, up just 4% from a year ago. Analysts currently forecast little or no top-line growth for the next several years. Over the past 5 years, it has seen revenue increase just 12%, though earnings growth has been a bit higher (9% compound annualized growth over 5 years).

Cronos Group has followed a different path than most of its peers, pursuing an "asset-light" strategy. As of Q2, its entire investment in fixed assets was $193 million, and its inventory was less than $36 million. The company didn't overbuild for the Canadian market. Its cash balance was $1.1 billion at mid-year, with no debt whatsoever. Cronos Group has pursued an investment into cannabinoids produced by yeast fermentation and has been focused on markets outside of Canada, particularly Israel and the U.S., where it has CBD operations as well as a recent investment in an option to acquire a minority stake in MSO PharmaCann. It has also pursued investment into consumption device research.

Altria has a market cap of $83 billion. Adding in net debt, the enterprise value is $108 billion. Cronos Group is quite small relative to Altria, with a market cap of $2 billion (less than 3% of Altria) and an enterprise value of $900 million roughly (less than 1% of Altria). Our point is that even paying a 75% premium for the equity of Cronos Group ($9.25) would cost the company $2.5 billion net of cash or less than 3% of its enterprise value. This is less than a single quarter of operating income for the company. The financial impact on its own P&L and balance sheet would be minimal. Since the company owns 156.6 million shares (42%) already, the actual cost to acquire the remainder of the company would be substantially lower. In fact, the $2 billion required to buy the remaining shares of Cronos at $9.25 would be $2 billion, which is less than the cash balance at Altria as of 9/30. Of course, a deal could be at a different price and could be stock-based rather than in cash. Our point is that this is rather insignificant financially to Altria.

Because Altria owns less than half of Cronos Group, it doesn't consolidate the results in its financials. Instead, the financials reflect only the changes in the carrying value of the investment. The fact that Altria's investment has deteriorated is already reflected in its financials.

With the stock price low, especially in light of a still tremendous cash balance relative to the market cap, buying Cronos is less about near-term financial benefits for Altria than doubling down on its strategic vision. The companies have worked closely now for almost three years, and we believe that Cronos Group is likely much more limited than the combined company would be in pursuing more deals like the PharmaCann transaction. Altria's larger size will allow a more aggressive investment into the American cannabis industry over the next few years. The original plan to acquire control of the company by exercising warrants is now at risk with the warrants way underwater and running out of time. Altria would be prudent, in our view, to rethink its position and buy the balance of Cronos Group now.

A Potential Clue on th