This week Ontario and Saskatchewan securities regulators released the reasons behind their decision in the Aurora Cannabis Inc. and CanniMed Therapeutics Inc. merger. We first commented on this story back in December, and have repeatedly provided updates throughout the transactions progression (see previous Friday articles here and here). To provide a brief recap, last year CanniMed was in the process of pursuing a transaction with Newstrike resources when Aurora (a competing marijuana producer) entered into a lock-up agreement with four major CanniMed shareholders, making an offer for CanniMed on the condition the Newstrike deal be cancelled. In response CanniMed adopted a tactical shareholder rights plan that effectively prevented Aurora from acquiring additional shares. The transaction ultimately spiralled into litigation with both CanniMed and Aurora launching claims against the other (as a note, CanniMed ultimately dropped their suit against Aurora and entered into a friendly transaction with the company). This week’s reasons stem from Aurora’s suit against CanniMed, and provide insight into how regulators will handle tactical plans moving forward. The reasons point out that tactical plans can be confusing to investors and market participants, and usually work to undermine the goals of the market. CanniMed’s rights plan was struck down as an inappropriate defensive tactic, with the regulator stating it will be a rare case in which a tactical plan will be permitted to interfere within the takeover bid regime.
It’s been a rough week for Facebook. On Friday, U.S. lawmakers formally asked Facebook Inc’s CEO Mark Zuckerberg to appear at a congressional hearing and explain how 50 million users’ data was passed into the hands of political consultancy Cambridge Analytica. The relationship between Facebook and Cambridge Analytica has been one of the more significant topics of conversation this week. To provide background, Cambridge Analytica used Facebook to build psychological profiles for a significant portion of U.S. voters. How? By creating a Facebook app called ‘This is Your Digital Life’ that appeared to be a personality quiz, but instead collected information on a political leanings, and obtained access to Facebook data (think ‘friends’ lists, contact information, and identifying characteristics such as age, marital status and gender). This is especially significant due to Cambridge Analytica’s client records, which show that the Trump campaign paid roughly US$6 million to the company. While the campaign has denied using the firm’s data, a whistleblower who worked for Cambridge Analytica between 2013 and 2015 claims his team spoke to Americans in focus groups to better understand political concerns, and used this knowledge to develop catchphrases such as “drain the swamp” and “build the wall”. The outcome of the scandal remains to be seen, and while #deletefacebook is trending, for the the time being users and advertisers alike – while unhappy with the company – have yet to abandon the popular platform.
Let’s lighten the mood a bit shall we? This week saw a hilarious acquisition, as Montreal’s Just for Laughs was sold to an investor group led by Canadian-born, L.A. based comedian Howie Mandel. Founded in 1983, the Just for Laughs company is best known for its annual comedy festival (which is, as it turns out, the largest international comedy festival in the world), and for producing short videos that prank unsuspecting by-standers and air on more than 100 airlines globally. The sale comes following a period of corporate turmoil. Last fall Just for Laughs went through a corporate shakeup after several women came forward and accused founder, majority stakeholder and then president Gilbert Rozon of sexual assault and harassment. Rozon stepped down in October, but the scandal and its aftermath took a toll on the privately held corporation. The finances behind Mandel’s acquisition remain confidential, however the investors group has been vocal about the company’s management moving forward. While Mandel hopes to continue to grow Just for Laughs’ global presence, he and his fellow backers trust in the group’s management and will allow the current team to continue ‘running the show’ both literally, and figuratively.
This week aircraft giant Boeing indicated that it will not appeal a ruling by the International Trade Commission which allowed Bombardier to sell its newest commercial jets in the United States without heavy duties. As we’ve commented before, last April Boeing launched a trade case with the International Trade Commission arguing that both the Canadian and Britain governments subsidized the development of Bombardier’s C series jets, which allowed the Quebec-based company to sell them in the United States at a substantially lower price. The U.S. Department of Commerce implemented a nearly 300 per cent duties on Bombardier jets while the ITC reviewed the case, but was ultimately forced to erase the duties with the ITC released their ruling.
And finally, the first shots in President Donald Trump’s trade war have been fired. The victim? China. This week the President instructed U.S. Trade Representative Robert Lighthizer to levy at least US$50 billion in tariffs on Chinese imports. The President has given the USTR 15 days to generate a list of products that will be impacted under the new tariff regime. Strengthening the U.S.’s technical barriers to trade has been a theme throughout Trump’s presidency. While recent conversation has largely focused on the President’s proposed steel and aluminum tariff scheme, China has been a topic of conversation for some time. Trump has pointed to intellectual property theft in China, along with the size of the U.S.-China trade deficit as a source of U.S. economic weakness. China to its credit has not taken the hit lying down. On Friday, China’s Commerce Ministry warned the United States that the country is confident in it’s ability to face a trade war, announcing plans to impose tariffs on US$3 billion of imports (including pork and steel pipes). The markets were quick to respond to Trump’s announcement, with the TSX’s S&P/TSX composite index and New York’s Dow Hones industrial index closing 275.35 and 724.42 points down respectively.