On Dec 12, 2020, Liberty Health Science announced that they were being acquired in a 100% stock deal by AYR Strategies for $290 million. According to Ayr CEO Jonathan Sandelman, it was a competitive bid process and Liberty leadership decided to go with Ayr because Ayr made the best offer. Liberty leadership also took the all-stock deal because Ayr’s low outstanding share count and value offer significant upside compared to other top-tier multi-state cannabis operators not already in Florida.
In my view, it’s an excellent move by AYR, immediately giving them a top 5 footprint in arguably the best cannabis state to be in, Flordia. First, Florida is the third-most populous U.S. state and once you factor in the 130+ million people who visit Florida each year, it jumps into the top two. Second, Florida will have an adult recreational use ballot in 2022 that is likely to pass. The deal would officially make Ayr a Florida-centric cannabis operator as two-thirds of their dispensaries would be in the state.
There is a minor movement of disgruntled Liberty shareholders pushing other shareholders to vote no on the deal at the Feb 23 special meeting. Outside of Jame Baker, most are ill-informed and can’t get over their terrible investment in Liberty. When considering advice from a long-time disgruntled Liberty shareholder, remember that they decided to buy Liberty over stocks like Trulieve, Grow Generation, or Curleaf. In the past 12 months, Trulieve has gained 268% while Liberty has gained 61%, but without the Ayr offer, Liberty would be sitting at a deep loss. Liberty shares have more than doubled since the Ayr deal was announced.
On Mar 1, 2016, Liberty moved to a high of $2.76 and then saw a steady decline to deep-penny stock status at 22 cents and eventually languishing between 32-40 cents during the months leading up to the Ayr buyout news. Liberty shareholders held their cash in a declining stock while Tesla, Apple, Amazon, and a host of others created generational wealth. They continued to own, and add to, Liberty while Curaleaf, Trulieve, Green Thumb, and Cresco stock came to market. Before the Ayr buyout news, Liberty shareholders who purchased shares above $2 saw losses of 85-95%, while shareholders in any of the other U.S. cannabis plays rose as high as 900%. Go look at the returns of Grow Generation, Trulieve, Curaleaf, or most U.S. cannabis plays in the past 2 years and it was tough to lose money in the sector. Liberty shareholders picked one of the biggest losers in the cannabis space – the smart ones see the Ayr deal as a good one. MedMen is one of the few cannabis stocks that has performed worse than Liberty and they have no buyer.
What Liberty “vote no!” shareholders fail to understand is that a no vote will send Liberty shares back to 30-40 cents (reading some comments on social media, some are fine with that). The only reason Liberty’s stock is above 40 cents now (92 cents as of Monday) is because of the Ayr purchase. Liberty Health Science released disastrous results last Friday and the shares went up almost 3% on Monday thanks to being anchored to Ayr’s share price (went up 6% on Monday). In my estimation, without Ayr, Liberty shares would revisit 30 cents or lower.
Liberty on it’s own has seen crop failures, several CEOs come and go, and can’t even open up dozens of new stores they have lined up because they can’t even keep their current store shelves stocked. Could Liberty go it alone and turn around the company? Sure, but Wall Street hates uncertainty and Liberty has a terrible track record of meeting goals and reaching estimates. For me, I became a Liberty shareholder on the Ayr buyout news because I feel Liberty’s assets are underperforming and the right leadership could turn Liberty into a major player in Florida. Ayr is that leadership, Liberty “vote no!” shareholders are not.
