BudTrader To Go Public In Reverse Takeover (2024)

The cannabis e-commerce online vendor BudTrader is going public in a reverse takeover with Lake Victoria Mining, Inc. (OTCPINK:LVCA). The privately held Encinitas, CA-based P5 Systems Inc. has owned and operated the BudTrader.com since 2016. The website boasts two million-plus registered users safely and legally post classifieds–style advertisem*nts for cannabis products, services, jobs, information, and equipment.

LVCA is a control affiliate of Grapefruit (OTCPINK: GPFT), which holds California permits and licenses to both manufacture and distribute cannabis products. Grapefruit’s extraction laboratory and distribution facilities are located in the industry recognized Coachillin’ Industrial Cultivation and Ancillary Canna-Business Park in Desert Hot Springs. Grapefruit reported net revenues of $451,196 for all of 2019. The company was previously known as Imaging 3 and traded under the symbol IGNG, which changed in January 2020.

The takeover expands the alliance between the two southern California firms which was first made public on April 1, 2020, when the firms announced a license agreement between the two companies. Since that time, the firms have worked closely implementing the logistics of the license, and in the course of that work the concept of the acquisition developed into a general plan for the Acquisition culminating in the execution of the LOI. At the conclusion of the acquisition, Grapefruit’s founders and management team will own approximately 20% of post-acquisition LVCA/BudTrader.

“We have been intrigued by the idea of an alliance with BudTrader since our first meeting with them in March 2020 in Palm Springs California,” said Grapefruit CEO Bradley Yourist. “BudTrader’s multimillion cannabis-centric user social media base and its custom-designed analytics not only allow Grapefruit to target market its products to BudTrader’s specific set of consumers but also receive constant real-time feedback on our products from BudTrader’s users on the social media platform. We can rapidly fine-tune a potentially disruptive product such as our Patchless-Patch on the BudTrader platform in real-time. BudTrader will receive marketing fees in consideration for its online marketing efforts in connection with sales of Grapefruit and its partner’s products and our unique Grapefruit offerings will draw new users to the BudTrader site. As our product sales and revenues grow, BudTrader’s user base and revenues will grow as a result of our cross-marketing efforts.”

BudTrader’s founder Brad McLaughlin added, “We have been working with Grapefruit studying advanced data analytics from the legal cannabis marketplace and immediately recognized the synergy between Grapefruit and BudTrader at both the corporate culture and management team level. It’s a natural fit.”

Bud Trader

BudTrader was originally conceived to be solely a cannabis commerce platform but as it has increased in the number of users and user time spent on the site. BudTrader’s founder Brad McLoughlin and its directors and LVCA’s current management Bradley and Daniel Yourist, also the control persons of Grapefruit USA, Inc., all believe this cannabis-centric social media platform has the potential for explosive growth. NBA champion John Salley joined the company’s board in February 2019.

In May 2019, the company offered pre-IPO shares to the public calling itself the “Craigslist of Cannabis.” The shares were offered at EquiFund CFP. The company was raising $1 million and pricing its shares at $1.25. This gave the company a valuation of $16 million.

According to the offering in 2019, BudTrader’s revenues for the most recent fiscal year-end were $781,758.00, while the long term debt was listed at $149.200. The net income for the same time period was $83,767.00. The revenue fell from the prior fiscal year-end of $1,289,879.

MassRoots Connection

Douglas Leighton was listed as an advisor to BudTrader on its pitch deck for the pre-IPO shares. Leighton was recently charged by the SECfor a scheme in which he allegedly acquired discounted shares in a microcap company, knowingly failed to disclose his holdings and sales, and manipulated the public market for those shares. Leighton, two entities he controlled, and six investors he directed agreed to settlements ordering them to pay nearly $1.5 million in civil penalties, disgorgement, and prejudgment interest.MassRoots Connection

The company, though said Leighton resigned as a board member and advisor in March.

Dana Rohrabacher

Former Congressman Dan Rohrabacher, who has been a staunch cannabis advocate is also listed as an investor/advisor to BudTrader. Rohrbacher has come back into the news after it surfaced that he allegedly tried to broker a pardon for Julian Assange at the request of President Trump. Trump now says he hardly knows Rohrabacher. The former congressman is mostly working as a lobbyist.

LVCA Trading Activity

LVCA short interest popped in October 2019 to 131,368 from September’s 100 shares. The stock went from one cent a share in October to seven cents a share on no news. By November it had dropped back to three cents a share. For most of 2020, the shares have traded below two cents.

BudTrader To Go Public In Reverse Takeover (2024)


What happens to shareholders in a reverse takeover? ›

Reverse takeovers – an explanation

Hence, after the takeover the current shareholders in the larger unquoted company will hold the majority of the shares in the quoted company and will therefore have control of the quoted company.

Is a reverse takeover better than an IPO? ›

While a traditional IPO may require months or years to complete, an RTO may be completed in just weeks. For a company that wants to become publicly traded, reverse takeovers (RTOs) can be a cheaper and quicker option than an IPO. However, they tend to pose greater risks for investors.

What is the reverse merger process of going public? ›

A reverse merger is a corporate tactic utilized by private companies seeking to “go public” – i.e. become publicly listed on an exchange – without formally undergoing the initial public offering (IPO) process.

Is a reverse merger good for shareholders? ›

Reverse mergers also have some inherent disadvantages, such as: Some reverse mergers come with unseen circ*mstances, such as liability lawsuits and sloppy record keeping. Reverse stock splits are very common with reverse mergers and can significantly reduce the number of shares owned by stockholders.

Do I lose my shares in a takeover? ›

The closing

If the transaction is being paid in all cash, the shares should disappear from your account on the date of closing, and be replaced with cash.

What happens to existing shareholders in a takeover? ›

Cash and stock takeovers:

The original position will be closed, and a new position will be opened to reflect the terms of the takeover based on the previous night's closing price and the cash offer, and adjusted for interest depending on the contract of the bet.

Should you sell shares after a takeover? ›

It's rarely worth holding on to your shares long after the announcement of an all-cash acquisition. For stock or cash-and-stock deals, your decision to hold or sell should be based on whether you have any desire to be a shareholder in the acquiring company.

Do share prices go up after a takeover? ›

When one company acquires another, the stock price of the acquiring company tends to dip temporarily, while the stock price of the target company tends to spike. The acquiring company's share price drops because it often pays a premium for the target company, or incurs debt to finance the acquisition.

How long does a reverse takeover take? ›

A Simplified Process

While conventional IPOs can take months (even over a calendar year) to materialize, reverse mergers can take only a few weeks to complete (in some cases, in as little as 30 days). 34 This saves management time and energy, ensuring that there is sufficient time devoted to running the company.

What happens to a stock after a reverse merger? ›

The Reverse Merger Process

The public company effectively acts as a shell company by ceding these shares to the private one. The deal is completed when the private company trades shares with the public shell in exchange for the shell's stock, making the acquiring company a public one.

What are the problems with reverse merger? ›

Another disadvantage of reverse mergers for shareholders is the likelihood of performing a reverse stock split. During the process of merging, shareholders may decide to reduce the number of shares and then issue new shares, diluting the value of the original shares.

What are the advantages of reverse merger over initial public offer? ›

Reasons to go Through a Reverse Merger
  • It's easier and cheaper. ...
  • Access to capital and liquidity. ...
  • Greater ownership and control. ...
  • Merging with an existing public company to go public allows the company to take advantage of a name that may already be front and center of investors' minds.

What are some famous reverse mergers? ›

When VMWare was acquired by Dell, a reverse merge was in place so the latter would be back to the stock market as a public company. In July 2020, Fisker, Inc announced plans to go public via a merger with Spartan Acquisition Corp (SPAQ), a "blank-check" company backed by Apollo Global Management.

Should you buy stock before a merger? ›

Again, if the acquisition necessitates the acquiring company incurring substantial debt, this could impact the company's financial health and future growth prospects. The timing of investment can also be important. If you buy stock early enough, you may take too much risk if the deal falls through.

How much does a reverse merger cost? ›

How much does a reverse merger really cost? Costs vary based on a number of factors. A reverse merger has upfront shell costs, transaction costs, compliance expenses and potentially other costs. The total cost can easily exceed $450,000 plus stock.

Is a reverse split bad for shareholders? ›

Many times reverse splits are viewed negatively, as they signal that a company's share price has declined significantly, possibly putting it at risk of being delisted. The higher-priced shares following the split may also be less attractive to certain retail investors who prefer stocks with lower sticker prices.

What happens to my shares if another company takes over? ›

If a publicly traded company is acquired by a private company, its share prices will typically rise to the takeover price. When the deal is closed, existing shareholders will receive cash in return for their stock (i.e., their shares will be sold to the acquiring company).

What happens to authorized shares in a reverse split? ›

The number of outstanding shares of Common Stock will be decreased as a result of a Reverse Stock Split, but the number of authorized shares of Common Stock will not be so decreased.

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