Is the Cresco-Tryke deal at risk of amendment due to its fixed-dollar equity structure?

We suspect the fixed-dollar structure of Cresco Labs’ acquisition of Tryke likely will result in the deal’s downfall – either through an amendment or outright termination.

As currently structured, Cresco’s 60% share-price decline gives Las Vegas-based Tryke 16%-21% of the new company for only 7%-10% of the pro forma sales.

Cresco, based in Chicago, has shown a willingness to alter deals, havingĀ amended its merger with Origin House and terminated its acquisition of VidaCann.

To be clear, our conclusion is based purely on our analysis of this deal structure with a fixed-dollar consideration paid in equity, which increases deal-execution risk when stock prices change dramatically from the price at the deal announcement.

We have not heard anything specific, and the company provided no comment in response to questions.

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