• The Week’s Closed Equity Deals
  • On January 19, Canopy Growth Corporation, the third largest Canadian LP by market cap, closed an upsized private placement of 8.16m units at $4.29 per unit for gross proceeds of $35M
  • Each unit consists of one common share and one five-year warrant exercisable at $4.83 per share (a 12.6% premium)
  • The shares were sold at an 8.5% discount to the preannouncement price of $4.67
  • The five-year warrants with low exercise premiums are pretty valuable, reducing the net share price implied by the unit sale to $3.03
  • The net share price was a 35.36% discount to the preannouncement prices. Indicating a growing reluctance of shareholders to accept additional dilution, although what other choice the company has is unclear.
  • Proceeds will bolster liquidity and reduce debt.
  • Canopy continues to be able to sell equity despite its inability to achieve positive EBITDA after numerous claims that it was just around the corner. Consensus estimates show a negative $67M for the year ending March 2024 and roughly breakeven for the year ending March 2025. However, cash flow from operations is projected to be negative for both years.
  • The graph below shows the Viridian Credit Tracker model credit rankings for the seven Canadian LPs with market caps over $100M. Canopy ranks at the bottom, with the worst leverage and profitability rankings and #5/7 liquidity rankings.

• Canopy’s future U.S. assets, especially its interest in TerrAscend, are its most attractive properties. Still, we do not see federal legalization anywhere on the horizon, so it remains unclear how these assets will be monetized.

Public vs. Private Raises: 

• Two of the three capital raisers this week were public companies. Both trade in the U.S. on the Nasdaq, and one also trades in Canada on the TSX.

Equity vs. Debt Cap Raises: 

• Equity accounted for two of the three raises and 93.5% of the dollars raised.