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Acreage Holdings to Raise Up to $60 Million in Fresh Capital

By Eric Volkman – Jun 3, 2020 at 2:47PM

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The vertically integrated cannabis company is using two different means to shore up its finances.

Acreage Holdings (ACRGF) is scaring up new capital, largely via an agreement under which it will sell up to $50 million worth of its Class A stock -- the shares that trade in the U.S. market. It also floated a $10 million issue of secured convertible debentures.

The stock issue will take the form of a "standby equity distribution agreement." This means that the Canadian cannabis company can sell its stock, up to the aforementioned amount, from time to time to a certain institutional investor. These sales are subject to a set of rules and limits in terms of timing and amounts. Acreage did not identify the investor.

Marijuana leaf atop a $1 dollar bill.

Image source: Getty Images.

The convertible debentures bear an annual interest rate of 15% and are secured by Acreage's dispensaries in Connecticut. They convert into Class A shares at $1.68 per debenture -- a price that's well below Tuesday's closing price of nearly $3.07.

Up until Sept. 30, holders of these securities will be limited to converting $550,000 in principal amount. And until Sept. 29, the company holds the right to redeem up to 95% of the principal amount without incurring a penalty.

Acreage said it will use the proceeds of the two flotations "for working capital and general corporate purposes." It did not get more specific.

Stock and stock-adjacent flotations have become commonplace among marijuana companies, and this one could stoke the usual fears of stock dilution. According to the latest data compiled by Yahoo! Finance, Acreage has just over 66 million shares outstanding on the U.S. market.

On Tuesday, Acreage's share price slumped by 1.4% while the broader market recorded healthy gains.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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