OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
Debt Capital Raises
Debt Transaction Chart
Viridian publishes weekly data and analysis on debt capital raises in the Cannabis/CBD/Psychedelic industries. This data includes information about the company issuing debt (public/private, state/country location), deal size, deal structure, pricing, warrants, and credit data.
Week ended 12/22/2023
Week ended 12/22/2023
Debt Commentary
Week ended 12/22/2023
- Debt accounted for 62% of trailing 8-week capital raises, down from last week. The ratio may stay lower than trend line levels if companies utilize favorable regulatory news to issue equity.
- The Week’s Only Closed Debt Transaction
- On December 19, 2023, Delota Corp. (LOTA: CSE), a Canadian vape and nicotine-related products retailer that operates 28 special vape stores in Ontario and five licensed dispensaries in Ontario under the Offside Cannabis name, closed its $0.67M non-brokered private placement of senior secured convertible debenture units, led by Plaza Capital.
- The debentures have a 12% coupon, an 18-month maturity, and a $0.075 conversion price (0% premium)
- The debentures are accompanied by 9M common share warrants with exercise prices of $.084 (12.48% premium) and 36-month maturity.
- The debentures are secured by a general security agreement from the company and its wholly owned subsidiaries and a pledge of the stock of the subsidiaries.
- The combination of a no-premium conversion option with a 112% warrant coverage with a three-year expiration and a low premium exercise price makes this issue extraordinarily costly for the company. Using our usual methodology of explicitly valuing the embedded options in all debt structures and treating these values as OID on the debt issue, we estimate an effective cost of 61.77%. We are a bit surprised by these terms, given the company’s reasonable credit profile:
- Proforma Debt/ Market cap and Debt/ Annualized EBITDA are reasonably high at 2.33x and 2.85x, respectively.
- EBITDA and Cash flow from operations have been positive for the last six quarters, and revenues are consistently growing q/o/q.
- Liquidity is adequate with a proforma free cash flow adjusted current ratio of 1.2x
Week ended 12/22/2023
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Weekly Credit Tracker
Each week, Viridian highlights a specific industry sector and provides a deep dive into credit metrics and comparable company credit rankings for public companies operating in that sector. Credit ratings are not currently available for public cannabis companies leaving companies, lenders, and investors with a gap of information. The Viridian Cannabis Credit Tracker fills this gap. The model uses 11 market and financial statement variables to discern 4 key credit factors: Liquidity, Leverage, Profitability, and Size, to provide credit/liquidity analysis for over 370 public Cannabis/Hemp companies.
- Week ended 12/22/2023
This week’s credit tracker focuses on the 7 Canadian Cultivation & Retail sector companies with market caps between $50M and $500M in the Viridian Value Tracker database in order to make the case that Auxly had a good reason to sell assets, even at prices significantly below its cost: The firm is over levered and needs to sell assets to reduce debt. The Viridian Credit tracker ranking system shows Auxly near the bottom of the peer group in terms of credit quality.
- Week ended 12/22/2023
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Additional content is available to Premium and Enterprise users. Please purchase a higher tier membership to see more.
This Chart is Only Available to Higher Tier Memberships
Please Purchase a Premium or Enterprise membership to see more.
Viridian publishes weekly insights on debt capital raises in the Cannabis/CBD/Psychedelic industries. These insights typically highlight the most interesting/meaningful debt transactions of that week, and commentary on market conditions, debt deal structures, and lenders.