The anticipated merger between cannabis technology provider Agrify Corp. (NASDAQ: AGFY) and controlled-environment agricultural technology firm Nature's Miracle (NASDAQ: NMHI) has been called off due to "unfavorable market conditions," according to announcements made by both companies on Monday.
Following the news, Agrify Corp. (AGFY) saw its shares plummet nearly 15% on the Nasdaq exchange, dropping from 33 cents per share at the opening to 28 cents by midday. Similarly, shares of Nature's Miracle (NMHI) fell more than 20%, decreasing from 74 cents in the morning to just under 54 cents by midday trading.
The merger, initially announced in April, aimed to consolidate Agrify and Nature's Miracle in a significant deal that valued the equity of publicly traded Agrify at $6.3 million. Under the terms, Nature's Miracle was to purchase $750,000 worth of LED lighting equipment from Agrify and assume its debt, owned by businesses controlled by Agrify CEO Raymond Chang, for an unspecified amount of cash and stock.
Additionally, Raymond Chang was slated to become president of a new Agrify division within Nature's Miracle and secure a seat on the combined company's board. Nature's Miracle planned to issue 0.45 common shares to Agrify shareholders for each Agrify share held, aiming to close the transaction in the latter half of 2024. Post-merger, Agrify shareholders were expected to own approximately 30% of the combined company's common stock, which would focus on indoor vertical farming and cannabis extraction.
The cancellation of the merger follows Agrify's troubling financial disclosures. The company reported an annual net loss of $18.7 million in its earnings call and expressed "substantial doubt" about its ability to continue as a going concern in its annual 10-K report. Despite these financial challenges, Agrify CEO Raymond Chang highlighted the company's strong momentum and growth in both cultivation and extraction business divisions.
In the announcement regarding the terminated merger, Raymond Chang stated, "Agrify continues to see strong momentum and pipeline growth quarter after quarter in both cultivation and extraction business divisions. We believe that it is in Agrify's best interest to stay the course and continue to execute." Chang emphasized that Agrify's management team and board are committed to exploring all strategic options to maximize shareholder value.
James Li, CEO of Nature's Miracle, echoed similar sentiments in their press release, stating, "Based on the current unfavorable market conditions, we've determined this is in the best interest of our shareholders and the long-term value of our business. At Nature's Miracle, we will continue to focus on our core indoor growing products, including grow light, dehumidifier, and container growing systems, where we are seeing strong momentum. We extend our appreciation to the Agrify team for their cooperation."
The abrupt decision to cancel the merger highlights the volatility and challenges within the cannabis industry, particularly amid uncertain market conditions. Both companies appear poised to continue their independent operations with a focus on their core competencies and market strategies.
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