Cresco Labs (CRLBF 2.49%), the ambitious multi-state operator (MSO) headquartered in Illinois, is gearing up to raise a boatload of cash. The marijuana company intends to issue up to $1 billion in new securities, it revealed in a shelf registration statement filed on Monday.
A shelf registration statement is essentially a document indicating a company's intent to float new debt, equity, or a combination of the two. In its Monday filing, Cresco wrote that it might issue one, some, or all of several different types of funding instruments, including subordinate voting shares (possibly combined with warrants) and debt securities.
Such a move has become typical for cannabis companies, as they often struggle with financial losses and cash flow drain. The most recent trend in equity fundraising is the issuance of "units," which consist of packages of stock and warrants bundled together. This theoretically makes the issue more attractive to investors than a straightforward stock flotation.
While Cresco Labs has had much success in its native state (in which recreational marijuana was legalized at the beginning of 2020), it consistently posts bottom-line losses. Meanwhile, the company aims to keep expanding its footprint throughout the U.S., and such expansion will not come cheap.
Last month, for example, it closed a deal for four new dispensaries in Ohio; it now owns the maximum five stores allowed by state law. Also in February, it was awarded a recreational marijuana license in Arizona, and since it has only one of its Sunnyside dispensaries in the state it's surely eager to build out its network there.
On Monday, Cresco Labs stock closed 1.5% higher, lagging behind the nearly 2.4% gain of the S&P 500 index.