The Week’s Largest Closed Equity Transaction:

• On November 22, 2022, InMed Pharmaceuticals (IMM: Nasdaq)(IN: TSX), which is involved in the pharmaceutical research, development, and manufacturing of rare cannabinoids, announced the closing of a $5.94M private placement.
  • InMed effectively issued 1.8M shares at $3.3 per share through pre-funded warrants and common shares.
  • The issue values InMed at a market cap of approximately $8.4M, a discount to its proforma cash of over $9M.
  • The two institutional purchasers also received 3.02M preferred share warrants that exercise into the same number of common shares. The warrants have a seven-year life and are exercisable at $3.04 per share (an 8% discount)
  • The preferred warrants would be extremely valuable (over $2 per share) if they were freely exercisable. However, a provision in the agreement prevents conversion if the holder would own more than 9.99% of the outstanding shares. Our rough calculations indicate that only around 800,000 out of 3.04M warrants could be exercised immediately.
  • This large warrant overhang, representing over 100% of outstanding shares, might limit InMed’s stock’s appreciation and make future stock issuance more difficult.

Public Company Raises: 

• Four of the five companies that raised capital this week were public. All four trade in Canada (two on the CSE and two on the TSX), and three trade in the U.S. (two on OTC and one on Nasdaq).

Equity vs. Debt Cap Raises: 

• Equity accounted for 89.0% of this week’s capital raises.