What happened
It's safe to say that no one caught a pleasant buzz from Tilray Brands (TLRY 6.98%) stock on Friday. The Canada-based marijuana company saw its shares sink by slightly over 21%, following news of yet another round of capital raising. By comparison, the S&P 500 index had a good Friday, advancing by 1.3%.
So what
After market hours on Thursday, the ever cash-strapped Tilray announced it had launched a registered offering of $150 million worth of convertible senior notes. In a subsequent press release it set the pricing of those securities.
The notes mature on June 15, 2027, and their annual interest rate is 5.2%. That interest will be paid semi-annually. The notes are convertible at any time into Tilray common shares, with the initial conversion rate being just over 376.6 shares per $1,000 principal amount. This represents a price of around $2.66 per share. Tilray retains an option to redeem the notes at any time after June 20, 2025 for cash.
Additionally, the underwriters of the marijuana company's issue have been granted a 30-day option to purchase up to $22.5 million in total worth of the notes.
Tilray said that it plans to use the proceeds from the issue mainly to redeem previously issued convertible senior notes. It will use a small portion of the funds for "general corporate purposes," about which it did not elaborate.
Now what
Investors are surely getting that "here we go again" feeling with Tilray, which like many pot companies has struggled with weak cash flow and frequent bottom-line losses -- and floated debt and equity to keep itself going. Another convertible notes issue means more debt, more dilutive equity coming to the market, or a combination of both. It's doubtful this latest offering will turn things around for the beleaguered company.
