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Monday, November 30, 2020

Understanding the Wild Swings in Harvest Health & Recreation Inc (OTCMKTS:HRVSF)

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Monday was a wild and wooly affair for shareholders of Harvest Health & Recreation Inc (OTCMKTS:HRVSF). Shares of the stock blasted higher during the session, and closed up over 12% on significantly increased volume. To further flesh out the story, the company just announced that it has entered into a binding agreement to acquire Verano Holdings, an arm’s length third party, one of the largest privately held multi-state, vertically integrated licensed operator of cannabis facilities, in an all-stock transaction for an estimated purchase price of approximately USD $850,000,000 based on a share price of CND $8.79.

According to the release, “The combined company will be one of the largest multi-state operators in the U.S., as measured by licenses held and facilities permitted. Upon completion of the transaction and regulatory approval, Harvest will hold licenses that will allow it to operate up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries.”

Harvest Health & Recreation Inc (OTCMKTS:HRVSF) bills itself as Harvest Health & Recreation Inc. cultivates, manufactures, and retails cannabis in the United States. The company is headquartered in Vancouver, Canada.

Harvest Health & Recreation Inc. is one of the first consistently profitable, vertically integrated cannabis companies with one of the largest footprints in the U.S. Harvest’s complete vertical solution includes industry-leading cultivation, manufacturing, and retail facilities, construction, real estate, technology, operational, and brand building expertise — leveraging in-house legal, HR and marketing teams, along with proven experts in writing and winning state-based applications.

The company has more than 525 employees with proven experience, expertise and knowledge of in-house best practices that are drawn upon whenever Harvest enters new markets. Harvest’s executive team is comprised of leaders in finance, compliance, real estate and operations.

Since its founding in 2011, Harvest has grown its footprint every year, has been ranked as the third largest cultivator in the U.S. and currently owns licenses for more than 130 facilities across the U.S. Harvest shares timely updates and releases as part of its regular course of business with the media and the interested public.

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As noted above, HRVSF just announced that it has entered into a binding agreement to acquire Verano Holdings, an arm’s length third party, one of the largest privately held multi-state, vertically integrated licensed operator of cannabis facilities, in an all-stock transaction for an estimated purchase price of approximately USD $850,000,000 based on a share price of CND $8.79.

The chart shows 5% added to share values of the company over the past week of action. In addition, the company has seen a growing influx of trading interest, with the stock’s recent average trading volume running 92% over the long run average.

It pays to take note of this fact with a float in play that’s extremely small — around 940K shares. This type of thing is something to watch out for: ramping trading activity can overwhelm available supply in a stock with this type of small float, leading to an upward burst in prices.

“The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company,” said Jason Vedadi, Executive Chairman of Harvest. “We are confident that this is an opportunity to continue to leverage each of our company’s strengths and drive continued shareholder value, while at the same time achieving the scale we know will give us a leadership position in one of the largest cannabis markets in the world.”

Currently trading at a market capitalization of $525.88M, HRVSF has about $1.1M in cash currently on the books, which must be weighed relative to about $8.6M in total current liabilities. The company has pulled in about $11.6M in total trailing 12-month revenues. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $HRVSF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $HRVSF, either long or short, and we have not been compensated for this article.

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