Kushtown/Finore Mining (FIN.C) deal falls apart in due diligence
Chris Parry March 14, 2017
This one is going to sting a bunch of folks, myself included.
Finore Mining (FIN.C), which was long halted as the team went through due diligence on their big Kushtown USA deal, and a change of business process at the same time, has finally pulled the plug on said deal.
The Transaction was announced in the Company’s news release dated January 26, 2017. The Company and Kushtown members have mutually agreed to terminate the SEA due to irreconcilable differences on operating the business on a going forward basis.
The Company currently has approximately $3,000,000 in cash and management intends to immediately begin assessing other opportunities to increase shareholder value.
Insiders are contractually prevented from discussing specifics, but I’ve managed to get some insight into the situation, and it comes down to not being able to comfortably move forward with the Kushtown team.
Finore had brought in an executive from British American Tobacco to run the rule over the outfit, streamline operations, and conclude the deal, but I understand it there were a long line of problems encountered in getting the company to a place where Finore felt comfortable allocating shareholder funds to the process.
In case you’re wondering, the stock will resume trading tomorrow. The company asked the exchange for a continued halt while it rejigged to another weed deal, as I understand it, but as they’re still technically a mining company, that request was denied.
I’m told we can almost definitely expect another deal to be announced in good time, and in the same sector (and likely in marijuana services or products, as that’s what investors financed), but not before the resumption.
To be sure, FIN stock will drop when trading resumes, and likely hard. The company is an Equity.Guru client, so we’d love that not to be the case, but it’s not my job to sugar coat reality or tell you that you should hold a stock destined for a lower price in the short term.
The question will be whether it drops hard enough to become, at the end of the day, a value buy, and whether that $3m in cash can get them a better deal in good time.
Finore did recently sell a copper mining property for 5m shares in Nickel One (NNN.V), and the money spent getting into the Kushtown deal has been negligible to this point.
One thing to consider is, through the extended trading halt, the company has managed to avoid a certain amount of stock deflation that has sapped some in the space over the last month. When it does settle, astute observers will want to assess whether any loss is worse or similar (or less) then the company might have suffered if it had just been doing regular business through that time.
Also worth remembering, FIN went through a financing that is on a four month hold until mid-April or so, which means a lot of stock that might have rolled down otherwise will instead be held for a period long enough for FIN to recalibrate.
Lastly, respect to the Finore team for doing the right thing (long term) and killing a bad deal, even if it hurts them (short term).
We’re going to keep watching and I’ll have more information as it drops, but I already know a few folks with weed companies who’ll be calling Finore tomorrow.
— Chris Parry
