Will it fill or won’t it? Chuck Rifici’s weed-streamer Cannabis Wheaton (CBW.V) has announced a $50 million financing that, if it fills, will sort out all CBW’s cash needs for a very long time.
But will it fill? That’s the question on the street among folks who bristle at the valuation placed on the company after it’s pre-listing financing round at $0.05 and a market price just a week after listing at $1.58.
But not everyone is bristling.
The financing will consist of two offerings; $25 million in special warrants, and $25 million in convertible debentures.
The special warrants will be offered at a price of $1.15 and come with a regular warrant priced at $1.60. Considering the market price of CBW right now is $1.58, these are easy money.
Each Convertible Debenture Unit will be offered at a price of $1,000 per principal amount of 6% senior unsecured convertible debentures, exercisable at $1.15 per share, and 435 common share purchase warrants of the company, exercisable at $1.60 for 24 months.
The Convertible Debentures will bear interest from the Closing Date at 6.0% per annum, calculated semi-annually in arrears on June 30 and December 31 of each year. The first interest payment will be made on June 30, 2018 and will consist of interest accrued from and including the Closing Date to June 30, 2018. The Convertible Debentures will mature on the date that is 24 months from the Closing Date (the “Maturity Date”). The Convertible Debentures will be convertible into Common Shares at the option of the holder at any time prior to the close of business on the last business day immediately preceding the Maturity Date at a conversion price of $1.15 per Common Share (the “Conversion Price”), subject to adjustment in certain events. Holders converting their Convertible Debentures will receive accrued and unpaid interest thereon for the period from and including the date of the latest interest payment date to, but excluding, the date of conversion.
Okay, so question: Will the share price hold up when it’s about to get mondo diluted, and for a price that is 27% cheaper than what you’re getting on the market right now?
Answer: The company forked out $150k to a US stock promotion outfit for market exposure down there, so the Americans are climbing all over it, even as Canadians are halted. That halt will be removed in time for 45 minutes of trading at the end of today, and I’d expect that share price to come down hard. Sorry, Americans.
One interesting thing to note, for those complaining about the principals getting ubercheap stock, is that they’ve agreed to tie 18% of the company stock up for six months, another for nine, and another for 12 months, as part of this financing announcement.
UPDATE: The company has just announced, due to overwhelming demand, that it is upping the raise to $80 million.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.