Shareholders in Acreage Holding, San Francisco investment firm Marcato Capital Management, say they will vote against a proposed transaction with Canada’s largest licensed producer, Canopy Growth Corporation.

In April, the Ontario LP announced plans to acquire Acreage, an American cannabis investment company, for a cool US$3.4 billion—a deal that would effectively give Canopy Growth a foothold to distribute its products in 20 legal states.

In an open letter to Acreage’s board of directors yesterday (May 6), Marcato Capital states the USD $3.4 billion valuation is “substantially lower than the fair value” considering its competitive presence in the international market and the impending loosening of federal guidelines.

The letter also drew attention to Acreages losses in the stock market since the deal was announced. After the proposal went public, Canopy Growth’s stock rose approximately 13 percent on the Toronto Stock Exchange, while Acreage shares dropped by about 2.3 per cent on the Canadian Securities Exchange.

As such, shareholders say they will vote the deal down at a meeting scheduled for June.

Marcato Capital owns roughly 575,000 shares in Acreage, which equates to just under three percent of the company.

“We believe Acreage’s strategic value, as one of the few multi-state operators of scale in the U.S., with leading positions in the most valuable markets merits a significant premium to any stand-alone cash-flow derived valuation,” wrote Mick McGuire, founder of Marcato Capital, in the letter.

“Furthermore, we believe enterprise values of cannabis companies will skyrocket upon the relaxation of current Federal restrictions.”

Instead, McGuire suggests Acreage either remain independent or launch a “formal and competitive sale process” open to every other “major spirits, beer, beverage, tobacco, cannabis, and consumer company”.

“This really does appear to be a singular opinion, inconsistent with the positive feedback we have been getting from our shareholders since the deal was announced,” Howard Schacter, Acreage’s head of communications told the Financial Post in response to the letter.

Canopy Growth has not yet issued a statement.