Equity Raises:

• On February 19, 2025, Greenlane Holdings (GNLN: Nasdaq) closed a $25M “at-the-market” private placement of equity units.
  • Greenlane sold 21.0M units at $1.19 per unit, the share price prior to the announcement.
  • The unit offering came with two series of warrants:
    • 1 warrant per unit of Series A PIPE warrants with an exercise price of $1.4875 per share and a five-year life. This warrant has a Black-Scholes value of approximately $ .31 per unit.
    • 1 warrant per unit of Series B PIPE warrants with an exercise price of $2.975, a 2.5-year life, and a BS value of $.15 per unit
  • The net price implied by the transaction was $.74 per share after subtracting the value of the two series of warrants.
  • Greenlane’s stock dove by 38.6% and closed near the net share price calculated above. It was a pretty big hit, although rational, given the warrants included in the unit.
  • The company only had 4.16M diluted shares outstanding prior to the offering and will increase its share count by 21M (505%). So, even without the dilutive impact of the two warrant series, the sale of so many shares would have likely required a significant discount. The terms clearly speak to the difficulty of selling equity for any cannabis-related company in today’s environment. The need to give out so many warrants suggests this was a tough deal to complete.
  • Still, Greenlane badly needed the extra liquidity. Prior to the offering, we calculated a free cash flow adjusted current ratio of .76x, a figure that clearly indicates the need for additional funding. The transaction improves this ratio to 2.31x, a comfortable level of liquidity.

Public vs. Private Raises: 

• Three of the five capital raisers this week are public companies. All three trade in the U.S. (one on Nasdaq, one on OTCQX, and one on OTCQB). Additionally, one trades in Canada on the CSE.

Equity vs. Debt Cap Raises:

• Debt accounted for 59% of trailing 8-week capital raises primarily because of the significant VIREO stock issue. The ratio may go down if companies are able to utilize favorable regulatory-induced stock price increases to complete equity issues. However, equity pricing has remained stubbornly low while the cannabis debt capital markets have reopened.