Canopy Growth Announces Upsized US$35 Million Private Placement

Rhea-AI Summary

Canopy Growth Corporation (CGC) has entered into subscription agreements with institutional investors for a private placement offering of 8,158,510 units at a price per unit of US$4.29, resulting in aggregate gross proceeds of approximately US$35 million. The purpose of the offering is to provide the company with additional liquidity to pay down debt, strengthen its financial position, and for working capital and general corporate purposes.

Financial Analyst

The private placement offering by Canopy Growth Corporation is a strategic financial maneuver designed to enhance the company's liquidity and reduce its debt. The infusion of approximately US$35 million in capital is a significant move, considering the current market conditions and the company's previous financial performance. The pricing of the units at US$4.29, along with the associated warrants, indicates an attempt to attract institutional investors while offering a potential upside through the warrants exercisable at US$4.83.

From a financial perspective, the use of proceeds to pay down debt is a prudent approach. It suggests a focus on improving the balance sheet and reducing interest expenses, which can lead to improved net income margins over time. However, the dilutive effect of the new shares and warrants on existing shareholders cannot be ignored. The impact on earnings per share will need to be monitored closely, as the market often reacts negatively to dilution if not offset by substantial growth prospects.

Market Research Analyst

The cannabis industry has faced volatility and regulatory challenges, affecting companies like Canopy Growth. This offering could signal to the market that Canopy Growth is taking proactive steps to secure its financial future. The inclusion of both Series A and Series B Warrants provides investors with an incentive to participate in the offering, while potentially aligning their interests with the long-term success of the company.

It is important to consider the competitive landscape and how additional liquidity might enable Canopy Growth to invest in growth opportunities or operational efficiencies. The timing and reception of this offering could also influence the market's perception of the company's stability and its management's strategic planning capabilities.

Legal Expert

The provision of customary registration rights in the subscription agreements is a standard legal practice in private placements, ensuring that the institutional investors have the option to liquidate their positions in the future. This aspect of the deal could make the offering more attractive to investors by potentially increasing the liquidity of the securities they are purchasing.

It is also worth noting the legal implications of the exercise terms of the Series A and Series B Warrants. These terms could have been structured to prevent an immediate dilution of the common shares and to stagger the potential impact on the share price over the specified exercise periods. The legal structure of the offering, including the registration rights and the warrant terms, reflects a balance between the company's need for capital and the protection of investor interests.

SMITHS FALLS, ON, Jan. 18, 2024 /PRNewswire/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (Nasdaq: CGC), today announced that it has entered into subscription agreements (the "Subscription Agreements"), dated as of January 18, 2024, with certain institutional investors (the "Investors") in a private placement offering (the "Offering") of 8,158,510 units ("Units") at a price per Unit of US$4.29 for aggregate gross proceeds of approximately US$35 million. 

The purpose of the Offering is to provide the Company with additional liquidity to further strengthen Canopy Growth's financial position. Proceeds are expected to be used to pay down debt, which is consistent with the Company's strategy for overall debt reduction, as well as for working capital and other general corporate purposes.

Each Unit will be comprised of (a) one common share of the Company (a "Common Share") and (b)(i) one Series A Common Share purchase warrant (a "Series A Warrant") or (ii) one Series B Common Share purchase warrant (a "Series B Warrant" and, together with the Series A Warrants, the "Warrants"). Each Warrant will entitle the holder to acquire one Common Share from the Company at a price equal to US$4.83. The Series A Warrants will be exercisable immediately following the closing of the Offering for a period of five years from such date and the Series B Warrants will be exercisable for a period commencing on the date that is six-months following the closing of the Offering and ending on the date that is five years following such date. The Company has also agreed to provide the Investors with customary registration rights.

The closing of the private placement pursuant to the Subscription Agreements is expected to occur on or about January 19, 2024, subject to Toronto Stock Exchange approval and customary closing conditions.

This news release is issued pursuant to Rule 135c under the Securities Act of 1933 and shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction. Any offering of the securities under the resale registration statement will only be by means of a prospectus.

About Canopy Growth

Canopy Growth is a leading North American cannabis and consumer packaged goods ("CPG") company dedicated to unleashing the power of cannabis to improve lives. Through an unwavering commitment to our consumers, Canopy Growth delivers innovative products with a focus on premium and mainstream cannabis brands including Doja, 7ACRES, Tweed, and Deep Space. Canopy Growth's CPG portfolio includes gourmet wellness products by Martha Stewart CBD, and category defining vaporizer technology made in Germany by Storz & Bickel.

Canopy Growth has also established a comprehensive ecosystem to realize the opportunities presented by the U.S. THC market through its rights to Acreage Holdings, Inc., a vertically integrated multi-state cannabis operator with principal operations in densely populated states across the Northeast, as well as Wana Brands, a leading cannabis edible brand in North America, and Jetty Extracts, a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology.

Beyond our world-class products, Canopy Growth is leading the industry forward through a commitment to social equity, responsible use, and community reinvestment—pioneering a future where cannabis is understood and welcomed for its potential to help achieve greater wellbeing and life enhancement.

For more information visit www.canopygrowth.com.

References to information included on, or accessible through, our website do not constitute incorporation by reference of the information contained at or available through our website, and you should not consider such information to be part of this press release.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Often, but not always, forward-looking statements and information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Examples of such statements and uncertainties include statements with respect to the expected closing date of the Offering; expectations regarding the strengthening of the Company's financial position; and expectations regarding the use of the proceeds from the Offering.

Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including negative operating cash flow; uncertainty of additional financing; use of proceeds; volatility in the price of the Common Shares; expectations regarding future investment, growth and expansion of operations; regulatory and licensing risks; changes in general economic, business and political conditions, including changes in the financial and stock markets and the impacts of increased rates of inflation; legal and regulatory risks inherent in the cannabis industry, including the global regulatory landscape and enforcement related to cannabis; additional dilution; political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation and the interpretation of various laws regulations and policies; public opinion and perception of the cannabis industry; and such other risks contained in the public filings of the Company filed with Canadian securities regulators and available under the Company's profile on SEDAR+ at www.sedarplus.ca and with the SEC through EDGAR at www.sec.gov/edgar, including under the heading "Risk Factors" in the Company's annual report on Form 10-K for the year ended March 31, 2023 and its subsequently filed quarterly reports on Form 10-Q

In respect of the forward-looking statements and information, the Company has provided such statements and information in reliance on certain assumptions that they believe are reasonable at this time. Although the Company believes that the assumptions and factors used in preparing the forward-looking information or forward-looking statements in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. Should one or more of the foregoing risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The forward-looking information and forward-looking statements included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information or forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

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SOURCE Canopy Growth Corporation

FAQ

What is the purpose of the private placement offering announced by Canopy Growth Corporation?

The purpose of the offering is to provide the company with additional liquidity to pay down debt, strengthen its financial position, and for working capital and general corporate purposes.

How many units are included in the private placement offering?

The private placement offering includes 8,158,510 units.

What is the price per unit in the private placement offering?

The price per unit in the private placement offering is US$4.29.

What is the total gross proceeds from the private placement offering?

The private placement offering resulted in aggregate gross proceeds of approximately US$35 million.

What will the proceeds from the private placement offering be used for?

The proceeds from the private placement offering are expected to be used to pay down debt, strengthen the company's financial position, and for working capital and general corporate purposes.