The Direct Public Offering (DPO) is an alternative that allows the placement of the company’s shares, dispensing with intermediaries. This procedure reduces share placement costs, allowing companies with less available capital to raise capital through the sale of their shares. Canopy Growth seems to be opting for this route after announcing a few hours ago the agreement with an institutional investor for the purchase and sale of up to $150 million in capital through senior unsecured convertible debentures.
Under the terms of the recently reached agreement, the Institutional Investor will initially purchase $100M of the convertible notes. If certain conditions described in the trust agreement are met, an additional $50M of the convertible notes will be purchased. It was also made clear that Canopy Growth will not pay cash under any circumstances with respect to principal, interest, or any other amounts due.
“Canopy Growth is executing a strategy focused on accelerating growth and profitability by transforming our Canadian operations and fast-tracking entry into the US market,” said Judy Hong, Chief Financial Officer of Canopy Growth. “Building on other recent actions taken to enhance cash flow, this attractive capital immediately adds to Canopy Growth’s cash on hand and provides additional flexibility to continue advancing strategic priorities.”
The purchase of the convertible debentures will be pursuant to a registration statement on Form S-3ASR with the US Securities and Exchange Commission (SEC). The convertible debentures have been sold at $1,000 per unit and bear interest at a rate of 5.0% per annum.
In addition, the convertible debentures are convertible into shares of common stock at the option of the Institutional Investor. The conversion price will be equal to 92.5% of the three-day volume weighted average price of the common stock ending on the trading day prior to conversion on February 28, 2028.