Charlotte’s Web Holdings, the market leader in hemp-derived cannabidiol (CBD), announced yesterday a $56.8 million investment from a subsidiary of BAT. Through this funding, the company will be able to raise the incremental capital needed to continue to pursue its growth initiatives. The firm is known for its expanding portfolio of botanical wellness products, which will undoubtedly now be a sector that will benefit greatly from the investment.
A convertible debenture in the amount of $56.8 million was the condition used to carry out BAT’s investment. The debenture is currently convertible into a non-controlling interest in Charlotte’s Web of approximately 19.9%. It was made clear that it is convertible at BAT’s discretion.
As a result of the investment, Charlotte’s Web will obtain funding that the team anticipates will help unlock further research and development. These processes have always been key to its global footprint, continued innovation, and the advancement of its intellectual property portfolio, says Jacques Tortoroli, CEO of Charlotte’s Web.
“The appeal of Charlotte’s Web is clear to us: a wide portfolio of high-quality products, strong brand equity, an extensive retail presence and robust B2C e-commerce platform serving a loyal US consumer base, and a track record of in-depth scientific research,” added Kingsley Wheaton, Chief Growth Officer at BAT. Charlotte’s Web gains substantial liquidity at an attractive cost of capital through this investment. According to the report, once the investment is completed, the firm will have pro forma cash and short-term investments of about $65 million.
BAT and Charlotte’s Web also entered into an investor rights arrangement (IRA) concurrently with the debenture. BAT has certain rights under the IRA, including the right to nominate 20% of the company’s board members (the “Board”) as long as BAT or its affiliates have at least 15% of the company’s common shares.
In addition, BAT’s rights to nominate other directors expire if BAT or its affiliates have less than 10% ownership of the company’s common stock. However, there are some exceptions in the IRA that may apply.
BAT also has certain pre-emptive rights regarding the issuance of common shares of the company. Additionally, the IRA gives BAT top-up rights for certain issuances of common shares of the company. BAT has the right to retain its share of common shares of the company, subject to the provisions in the IRA.