- Canopy Growth (TSX:WEED) is continuing its turnaround story with a new C$96.3 million exchange and subscription agreement with an unnamed institutional investor
- The company will allocate net proceeds to working capital and general corporate purposes
- Canopy Growth is the North American cannabis and consumer packaged goods company behind Doja, 7ACRES, Tweed, Wana, Deep Space, Martha Stewart CBD and Storz & Bickel
- Canopy Growth stock has given back 13.48 per cent year-over-year, and has lost 97.84 per cent since 2018
Canopy Growth (TSX:WEED) is continuing its turnaround story with a new C$96.3 million exchange and subscription agreement with an unnamed institutional investor.
The company will receive gross proceeds of US$50 million (C$68.3 million) and exchange C$27.5 million of existing debt maturing in September 2025 for a new senior unsecured convertible debenture maturing in 2029. Canopy will allocate net proceeds to working capital and general corporate purposes.
The institutional investor will receive a C$96,358,375 debenture convertible at C$14.38 per share that bears interest of 7.50 per cent per year, payable semi-annually in cash or, at Canopy’s option, in shares for the first four interest payments. The investor will also receive an additional 3,350,430 common share purchase warrants, with each warrant entitling the holder to acquire one common share for C$16.18 for five years from the closing date.
Canopy may execute a forced conversion if the average closing price of its common shares on the TSX exceeds C$21.57 for 10 consecutive trading days.
The agreement is expected to close next week.
Canopy Growth is a company in transition
The cash injection comes at a time of restructuring for the Canadian cannabis leader, as it attempts to right-size operations as industry-wide overproduction cuts into margins, and global cannabis legalization carries on at a glacial pace, the plant’s impending reclassification as a Schedule III controlled substance in the United States notwithstanding.
Key moves include getting rid of non-essential assets, such as its Tokyo Smoke retail stores and its BioSteel sports drink division, and positioning itself to capitalize on more prospective growth vectors, such as U.S. expansion, should the federal government move to unlock tax revenue from nationwide legalization, while engaging in cost reduction measures along the way that have significantly improved gross margins and cash burn year-over-year from December 2023 (slide 10).
With the company predicting positive adjusted EBITDA in all business units exiting FY2024 (ending March 2024), financial results still pending, and Canopy Growth stock having lost 97.84 per cent since 2019, now is the right time for potential investors to evaluate this ongoing turnaround story for a trade or long-term allocation.
About Canopy Growth
Canopy is the North American cannabis and consumer packaged goods company behind Doja, 7ACRES, Tweed, Wana, Deep Space, Martha Stewart CBD and Storz & Bickel.
Canopy Growth stock (TSX:WEED) last traded at C$14.19 per share. The stock has given back 13.48 per cent year-over-year.
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