Cannabis Giant Canopy Announces $30M Private Placement, Here's Where The Money Will Go

Canopy Growth Corporation WEED CGC announced on Tuesday that it has entered into subscription agreements with certain institutional investors in a private placement offering of 6,993,007 units at $4.29 per unit for aggregate gross proceeds of approximately $30 million.

Details

Each unit will be comprised of one company's common share and one series A common share purchase warrant or one series B common share purchase warrant, with each warrant allowing the holder to acquire one common share from the company at $4.83.

The series A warrants will be exercisable immediately following the offering's closing for five years. The series B warrants will be exercisable for five years as well, commencing on the date that is six months following the closing of the offering.

Why It Matters

The Ontario-based cannabis company said the move would further strengthen its financial position, allowing it to pay down debt, adding that it is in line with its strategy for overall debt reduction.

In its second-quarter earnings report announced in November, the company said it reduced overall debt by $364 million to $681 million during the period, resulting in a total debt reduction of approximately $1 billion since the start of fiscal 2023.

Canopy also reported an additional cost reduction of $54 million during the second quarter, bringing the total reduction to $226 million since the beginning of fiscal 2023. At the time, the company said it targets a cost reduction of $270 million to $300 million by the end of fiscal 2024.

Canopy plans to use the proceeds from the offering for working capital and other general corporate purposes as well.

What's Next

The closing of the private placement under the subscription agreements is expected to occur on or about Jan. 10, 2024, subject to customary closing conditions.

Other Business Updates

In November, New York beverage alcohol company, Constellation Brands Inc STZ. announced the expiration of all its warrants to acquire common shares of Canopy, adding that it didn't have intentions or plans related to the cannabis giant at the time.

In December, Canopy said fair well to its sports drinks unit. The company sold its BioSteel Canada and BioSteel Manufacturing, LLC subsidiaries to Coachwood Group for gross proceeds of $30.4 million.

CGC Price Action

Canopy's shares traded 10.91% lower at $4.49 per share during the pre-market session on Tuesday morning.

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