Aurora Cannabis (ACB -1.94%) announced yesterday that it has raised $125 million by issuing 12 million units priced at $10.45 each through a financing strategy called a "bought deal." The units are one share of the marijuana grower's stock and one half of a share's purchase warrant that can be exercised anytime over the next three years to acquire a full share of stock at a price of $12.60 per warrant share.
BMO Capital Markets and ATB Capital Markets will be acquiring the units and have another 30 days to acquire an additional 10% of the total at the same terms if there is an overallotment.
A good deal for both sides
A bought deal is one in which investment banks agree to buy the entire block of stock a company is issuing, but because it's a riskier move for the buyers (since they then have to try to sell the stock itself), they usually get a significant discount on the stock.
Conversely, a bought deal is less risky for the issuer because it is getting the entire sum of money it seeks without the worry of trying to sell the shares itself. The arrangements have been very popular with pot stocks.
Aurora's stock closed at $11.17 per share on Thursday, meaning BMO and ATB got a 6% discount, plus each share they bought essentially includes a warrant to buy two shares.
Aurora says it plans to use the proceeds for general corporate purposes, including reducing its debt. At the end of December, the marijuana grower had around $370 million in convertible debentures and long-term debt.
Aurora Cannabis has raised cash through stock sales several times over the past few months, diluting investors. While a poor performer in 2020, its shares are up 34% so far in 2021 and have tripled in value from their October lows.