Toronto, Ontario–June 21, 2021 – Red Light Holland Corp. (CSE: TRIP) (FSE: 4YX) (OTC Pink: TRUFF) (“Red Light Holland”) is pleased to provide the following initial FAQ to assist shareholders in connection with its previously announced transaction with Creso Pharma Limited (ASX: CPH) (FSE: 1X8) (OTCQB: COPHF) (“Creso Pharma”).
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What is an Exchange Ratio?
When two companies combine in an all-share transaction (i.e. where one company acquires another by issuing shares as consideration), a ratio is set to determine how many shares of the acquirer are provided for each share of the target.
How was the 0.395 Exchange Ratio Determined?
Prior to announcing the transaction, Creso Pharma valued Red Light Holland at C$148 million, representing approximately C$0.43 per Red Light Holland share. Given that the closing price of the Red Light Holland shares on the CSE was C$0.34 immediately prior to the announcement of the transaction, Creso Pharma valued Red Light Holland at C$30 million more than its actual market capitalization at such time (C$118 million market capitalization based on the closing market price of C$0.34 vs. C$148 million market capitalization offered by Creso Pharma, again representing approximately C$0.43 per Red Light Holland share.)
The day prior to the announcement of the transaction, the closing price of the Creso Pharma shares on the ASX was A$0.18, representing approximately C$0.169. As such, an exchange ratio was determined on this basis. As Red Light Holland is to be the surviving entity in order to maintain the CSE listing for the combined company, the exchange ratio was calculated on the basis of a number of Red Light Holland shares per share of Creso Pharma:
If Creso Pharma had not valued Red Light Holland at a premium, and the exchange ratio was based solely on the market price, the exchange ratio would have been 0.496. This would have meant more Red Light Holland shares being issued for each share of Creso Pharma, as opposed to the agreed “each Creso Pharma share will be replaced by 0.395 of a Red Light Holland share” that the deal was based on.
What does the Exchange Ratio Mean for Shareholders?
Upon closing the transaction, each Creso Pharma share will be replaced by 0.395 of a Red Light Holland share. For example, someone who owns 1,000 shares of Creso Pharma will receive 395 Red Light Holland shares in exchange for those Creso Pharma shares. Another example of this ratio would mean that if a Creso Pharma shareholder owns 100,000 shares they will receive 39,500 shares of Red Light Holland in exchange for those Creso Pharma shares, upon closing of the transaction.
Anyone who currently holds shares of Red Light Holland will have no change in their holdings. There will be no changes to Red Light Holland options or warrants either.
Is a Share Consolidation or Reverse Split Part of the Transaction?
No, there is no share consolidation or reverse split required as part of the transaction.
When will the Transaction Close?
The transaction is expected to close at the beginning of the fourth quarter of 2021. Until the closing date, both companies will continue to operate and trade independently.
How Many New Red Light Holland Shares will be Issued?
Based on Creso Pharma’s current capital structure, it is expected that up to 467 million Red Light Holland shares will be issued in connection with the transaction.
“Red Light Holland prides itself on continuously working hard to expand our business with the intention of increasing shareholder value. Creso Pharma believed we were a very strong company and rewarded our aggressive approach in the psychedelic sector, by agreeing to pay us a significant premium to our share price and market cap, as explained above,” said CEO & Director of Red Light Holland, Todd Shapiro. “We also pride ourselves on having transparency with our valued shareholders and we appreciate this opportunity to answer the many questions we’ve been receiving. Thank you for your enquiring minds. And thank you for your support. We look forward to future growth in Psychedelics and beyond!”