Shares of KushCo Holdings (OTC:KSHB) took a dive today after the struggling cannabis packaging supplier announced a secondary offering, closing down 36.5% at $1.71.

The maker of ancillary cannabis products, including vaporizer cartridges, batteries, and child-resistant bags, said that it had priced a $30.1 million registered direct offering.

Marijuana buds inside a plastic bag.

Image source: Getty Images.

The company will sell approximately 17.2 million units to a group of investors at an offering price of $1.75, with each unit consisting of one share of the stock and a warrant to purchase half a share of the stock. The warrants have an exercise price of $2.25 and expire in five years.

The deal essentially signals that $1.75 is a fair price for the stock, or at least that that's the most KushCo can get.

KushCo said the sale would bring in $30.1 million before placement fees and other expenses associated with the offering, and that it would use the funding for working capital and other general corporate purposes.

KushCo stock has tumbled sharply throughout September due to the widening backlash against vaping. Reports of illnesses and even deaths from vaping have prompted regulatory agencies to ban e-cigarettes or at least the flavored variety that is seen as targeting minors. The CEO of JUUL Labs, the biggest U.S. e-cigarette company, stepped down this week, and the company promised to suspend advertising in the U.S. Walmart, the world's biggest retailer, said it would no longer sell e-cigarettes, and even India announced a ban on the tobacco alternative, though that is being challenged in court.

Today's news has made already jittery investors even more nervous, as the stock has now fallen 55% since the end of August.

The capital raise, which follows KushCo's securing a $50 million credit line last month, is yet another sign that the company is quickly burning cash. It has lost $62.9 million in free cash flow through the first three quarters of the fiscal year and had $12.2 million in cash as of May 31, the end of its third quarter.

With the backlash against vaping, demand for KushCo shares has clearly plunged. The company reaffirmed its fiscal-year revenue guidance earlier this month, calling for sales to nearly triple to $145 million to $150 million, but the stock is likely to struggle if the vaping backlash continues to constrain its ability to raise cash. The stock sale is expected to close on Sept. 30.

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