The Globe and Mail reports in its Monday edition that Canadian cannabis companies which need money are being forced to agree to costly financing terms as their share prices collapse in an industry-wide rout.
The Globe's Tim Kiladze writes that marijuana players that require fresh cash have turned to everything from rights offerings to expensive construction debt to highly dilutive convertible debt units in recent weeks to raise funds. Pot producers are also starting to negotiate new terms with existing debt holders.
Late last week, one of the country's largest growers, Aurora Cannabis, said it would amend the terms on $230-million worth of convertible debt that comes due in March, 2020.
This type of debt can be converted to shares if the issuers' stock price rises, and many cannabis producers sold these securities during the sector's bull run. Now that pot shares are in free fall, it makes no economic sense for debt holders to convert -- so the companies are on the hook to repay them when the bond matures.
To deal with this, Aurora slashed the debt's conversion price Thursday, allowing holders of the 2020 notes to convert to stock at a 6-per-cent discount to its recent share price instead of the original $13.05.
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