As all Canopy shareholders should be aware, Canopy is acquiring Supreme. This means that upon deal closing in mid June (assuming the deal goes through which is most likely) that all Supreme securities will be converted into Canopy securities. This means that their will be tradeable Canopy warrants and debentures available to create more attractive opportunties to capture upside than simply owning Canopy common shares.

First, Supreme's first series of warrants (FIRE.WT):

These warrants have a $0.23 exercise price and expire on January 29th, 2024. There is no force acceleration clause.

10,000 Fire.WT will convert into  116.5872 Canopy Warrants    (10,000 x 0.01165872 = 116.5872). Note: the 0.01165872 is the Canopy shares being offered per each share of Fire as per the press release. This number will be used for all the conversions.

The new exercise price will become $19.73    ($0.23 / 0.01165872 = $19.73).

100 Canopy shares @ $35 = $3500
$3500 could purchase 20,588 FIRE.WT (which would convert into 240 Canopy warrants) ($3500 / $0.17 = 20,588).

IF Canopy goes back up to $60. The warrants would be worth $9,664.80                  
($60 - $19.73 exercise price x 240 warrants = $9,664.80)

The 100 Canopy shares one could have bought with the same amount of money would only be worth $6000  (100 shares x $60).

Thus one achieves a 1.5x leverage effect without any additional money at risk. The leverage effect becomes even more dramatic at higher price targets. For example, if Canopy were to hit $100, the 100 shares would be worth $10k, while the 240 warrants would be worth $19,264.80, thus achieving closer to a 2x leverage effect.


The second opportunity are Supreme's debentures (FIRE.DB). These are essentially bonds that pay you interest and later convert into common shares, allowing one to get paid while they wait for Canopy stock to appreciate.

at $140 per Fire.DB (equivalent to $34.22 per Canopy share) one gets an additional 13.6% yield while they wait for the shares to appreciate (5.7% cash interest, next payment being June 30, plus 7.9% accretion payable in additional debentures, next payment being Sept 9)

Every 1000 face value (costing $1400 at $140 quoted price) converts into 3508.77 Supreme shares, or equivalently 40.9 Canopy shares.

Ie. A $9800 investment could purchase 7000 Fire.DB at $140 and would eventally be convertible into 286.3 Canopy shares. These have a 2025 maturation date. There is a acceleration clause if the stock trades over $38.60 for 20 consecutive days. In the meantime, one yields 13.6% or about $1332 in additional income a year while one waits for the shares to appreciate. Debentures also give you downside protection below $100.

Summary:

Both these opportunities mention offer superior risk/reward and greater upside potential compared to holding Canopy common shares. Additionally, both are trading at up to a 5% discount to the conversion price mentioned in the deal, so one can earn an extra 5% between now and mid June assuming the deal closes.

Hope this helps.