Canopy Growth Builds War Chest with $10mm Raise

canopy-growth-corp-logoCanopy Growth (TSXV: CGC) announced  that it sold 4.35mm shares at a $2.30 offering price to a group of underwriters led by Dundee Securities.  The “bought deal” means that CGC will raise almost $10mm after subtracting the underwriting discount.  The offering could be expanded by an additional 652,500 shares that would result in gross proceeds of $11.5mm if the underwriter exercises its option. The financing is above the price of the last raise, which was in October after the elections in Canada and was at $2.05. This deal was priced below the recent trading range and a 14.5% discount to today’s close at $2.69:

CGC 032216

The company, which operates subsidiaries Tweed and Bedrocan Canada, said that it will use the proceeds of the deal, which is expected to close on April 15th, “for capital expenditures and for working capital and general corporate purposes.”  The raise may fuel speculation that the company might be interested in geographical expansion, including the potential acquisition of another licensed producer or late-stage MMPR applicant.  The company purchased what is known now as Tweed Farms in a similar manner, working with Health Canada to finalize its license application.

CGC’s fiscal year-end is March 31st.  As of Q3 ending 12/31/15, the company reported cash of $19.7mm.  The company used $4.2mm to fund operations in Q3, and CEO Bruce Linton has suggested that the company is taking a long view, with more of a focus on acquiring customers and expanding the brand rather than near-term profitability. Assuming the exercise of the underwriter’s option, the share-count will rise from 98.5mm to about 103.5mm.  The company also had 6.9mm options outstanding at an average exercise price of $1.78 as of Q3 and recently issued 950K options to officers and directors at $2.95.

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Breaking News by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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