What and when was the share consolidation?
High Tide Inc. (“High Tide”) consolidated (also known as a reverse stock split) its common shares (“Shares”) on a 15:1 ratio. The conversion was effective prior to the market open on May 13, 2021.
Why did High Tide consolidate its Shares?
The primary reason for the consolidation was to meet the minimum share price requirement to list its Shares on The Nasdaq Stock Market LLC. Additionally, many large institutions are only able to invest in companies with a share price significantly higher to where High Tide’s Shares were typically trading pre-consolidation.
How does this affect shareholders?
When the share consolidation took effect, High Tide reduced the number of issued and outstanding shares, which increases a shareholder’s per share value proportionately. After a share consolidation, a current shareholder holds fewer shares, but each share is proportionately worth more. As a result, share consolidations do not change the aggregate value of what shareholders own or the overall market capitalization of High Tide. For example, High Tide’s Shares closed at $0.60 on the day prior to the consolidation, so if a shareholder held 150,000 shares on May 12, 2021, they were worth $90,000.
On May 13, 2021 following the share consolidation, you would have 10,000 shares (150,000 / 15). However, these shares would have a value of $9.00 each immediately following the consolidation ($0.60 x 15). Accordingly, the value held would still be unchanged at $90,000 (10,000 x $9.00).
Note that no fractional shares were issued upon the consolidation. Any fractional interest equal to 0.5 of a share was rounded up to the nearest post-consolidation share, while any fractional interest less than 0.5 of a share was rounded down to the nearest post-consolidation share.
What happens to the warrants from the February 2021 financing (maturity Feb 24, 2024)?
These warrants were originally exercisable at a strike price of $0.58 for one High Tide share. Following the 15:1 consolidation of the common shares, the number of warrants was not altered. Accordingly, 15 of these warrants are exercisable for one post-consolidation share at an exercise price of $8.70 ($0.58 x 15).
For example, if you held 150,000 of these warrants on May 12, 2021, they would be exercisable to purchase 10,000 post-consolidation shares of High Tide for $8.70 each.
What happens to the publicly traded warrants originally issued by META (maturity Feb 6, 2023)?
These warrants were originally issued by META when it was a public company at an exercise price of $0.29 per 1 META share. These warrants are publicly traded and expire on February 6, 2023.
High Tide acquired META in November 2020. As part of that acquisition, META shareholders received 0.824 High Tide shares for every share of META they held. So, each 1 of these warrants is exercisable for 1 META share (which no longer exists) and translates to 0.824 High Tide shares. The effective exercise for these warrants was $~0.35 per High Tide share – and holders would need to exercise ~1.21 of them to get a whole High Tide share.
With the 15:1 consolidation, 15 of these warrants are exercisable at $4.35 ($0.29 x 15) – but technically for 1 META share (which no longer exists). Based on the 0.824 exchange ratio, the effective exercise price for 1 High Tide share is $~5.28 ($4.35 / 0.824), and a holder would need to exercise ~18.2 warrants (15 / 0.824) to receive 1 whole High Tide share.
For example, if you held 150,000 of these warrants, they would be exercisable to purchase ~8,240 post-consolidation shares (150,000 x 0.824 / 15) of High Tide at $~5.28 each.