Public vs. Private Cap Raises: Both of this week’s capital raises were closed by public companies. So far in 2020, public companies have accounted for 80% of all capital raises, vs. 67% for the same period in 2019. In 2020, public companies have accounted for 84% of total dollars raised, vs. 70% for the same period in 2019.
Public Company Listings: Of the 2 public company capital raises, both are listed in Canada on the CSE, and 1 also trades in the U.S on the OTCQB.
Equity vs. Debt Cap Raises: Equity-based capital raises accounted for 1 of this week’s 2 capital raises and accounted for 68% of the funds raised.
Largest Debt Raise: We tracked only 1 debt transaction in week 36. TruTrace Technologies, the developer of a fully-integrated blockchain platform for registration and tracking of intellectual property and testing data for the cannabis industry, closed a 3 year C$0.36 (US$0.27) million 8.25% Subordinated Secured Convertible Debentures deal. The issue was unusual because each $1,000 debenture converts into 20,000 shares of common stock and 20,000 warrants that have 2-year maturities. Both the original convertible debentures and the “debenture warrants” have exercise prices of C$.05, a 33% discount to the stock price on the day of issuance. The combination of this steep discount exercise price and the additional warrants make this an extremely expensive financing with an estimated effective cost of approximately 45% without even taking into account the extra warrants. We understand the credit market’s caution: TruTrace ranks #18 out of the 19 Software and Media companies we track in the Viridian Credit Tracker in overall credit quality based on its stretched liquidity, high market leverage, small size, and negative cash flow from operations in every quarter since its RTO in 2018. The company also recently announced that it will be late in filing its financial statements for the year ended April 30, 2020, so the most recently available financial data is from 1/31/2020.
Cap Raises by Sector: The 2 capital raises this week were spread across 2 different industry sectors with one in Cultivation & Retail and one in Software/Media.