Public Company Listings: Seven of the eight companies that raised capital this week were public. Five trade in Canada (four on the CSE and one on the TSX) and six trade in the U.S. (four on OTC, and two on NASDAQ).
Equity vs. Debt Cap Raises: Equity-based capital accounted for four of the week's eight deals and approximately 71% of capital raised.
Largest Debt Raise: On July 19th, 2021, Clever Leaves Holdings Inc. (Nasdaq: CLVR), a multinational operator with businesses and investments in the US, Canada, Columbia, Germany, and Portugal, closed a $25M secured convertible financing from Catalina LP an affiliate of Sundial Growers Inc. (Nasdaq: SNDL).
The notes have a 5% coupon payable in cash or PIK.
A conversion price of $13.50 (a 53.4% premium over the stock closing rice at transaction date) is applicable for up to ½ of the principal amount during the first year after issuance.
Under certain circumstances, up to ½ of the issue can be converted during the first year at an exercise price that is the greater of an 8% discount from the trading value of the stock or $6.44.
Calculating the economics of this transaction as though two separate series of warrants were issued with the strike prices above, we estimate an effective cost of 11.3% for the issue.
Proceeds were used to repay the company's $27.8 million of outstanding 2022 Convertible Notes for 90% of par value, generating a savings of $2.7 million in principal and a cash interest savings of approximately $750,000 million per year.
Most interesting Debt Raise of the Week On July 20th, 2021, Body and Mind Inc. (CSE: BAMM)(OTCQB: BMMJ), a $39M market cap MSO with operations in Nevada, California, Arkansas, and Ohio, announced that it had closed an US$11.11 million debt financing with FocusGrowth Asset Management and related entities.
The transaction is interesting for several reasons:
It is an example of the high cost of debt financing for small cannabis companies, a phenomenon we have chronicled on several occasions.