Newstrike Resources Stock Set for a Big Move?

Shares of Newstrike Resources Ltd. (TSXV:HIP) have been beaten down following a failed merger attempt with CanniMed Therapeutics Inc. (TSX:CMED)

SmallCapPower | February 26, 2018: Newstrike Resources Ltd. (TSXV:HIP) Thursday announced full exercise of the previously-announced over-allotment option allowing underwriters to acquire an additional 9,091,500 units at $1.32 per unit, providing Newstrike Resources with additional gross proceeds of ~$12 million. Newstrike Resources issued the over-allotment option in tandem with its earlier-announced short form prospectus offering of 60,610,000 units at $1.32 per Unit that closed on February 16, 2018.

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Through this exercising of over-allotment option, the total gross proceeds climbed to ~$92 million. The units were sold in accordance with an underwriting agreement by a syndicate of underwriters led by INFOR Financial Inc. and Cormark Securities Inc. (and included Eight Capital and Haywood Securities Inc.).

Each unit consists of one common share of Newstrike Resources and one common share purchase warrant, which will entitle the holder to buy one additional common share at an exercise price of $1.75 until February 16, 2020. In case the volume weighted average trading price of the common shares for 10 consecutive trading days go beyond $2.60, Newstrike Resources shall have the right to hasten the expiry date of the warrants upon not less than 15 trading days’ notice subjected to TSX Venture Exchange approval.

Further, the underwriters also received an aggregate of 545,490 compensation options as part of the over-allotment option. Each compensation option allows the holder to acquire one unit at $1.32 per unit until February 16, 2020.

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In another announcement, Health Canada’s Office of Medical Cannabis has completed the paper-based review of license application by UP Cannabis Inc., wholly-owned subsidiary of Newstrike Resources, for its first phase of Niagara Facility. The license process now moves to next stage of verification by Health Canada about the functionality, physical and security-related compliance of this recently-retrofitted 200,000 sq. ft. facility, of which ~160,000 sq. ft. is dedicated to production. UP Cannabis expects smooth proceeding of further steps and the start of production at the Niagara Facility in the summer 2018, with construction of additional manufacturing, packaging and administrative facilities projected to be completed in Q4 2018.

Additionally, the ongoing expansion of the Niagara Facility is expected to be completed in the near term, which will double the initial projected annual capacity from ~12,500 kg to a projected annual total of ~25,000 kg. Currently, Newstrike Resources stock has a market capitalization of $444.61 million with a price-to-book multiple of 28.48x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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