While hardly as exciting as Tilray’s wilde swings from last month when the stock hit $300 then crashed to $100 just a few days later, before rebounding once more, moments ago the company which many had expected would use its soaring stock price as a currency to raise new capital did just that when it announced it intends to sell $400 million in convertible senior notes due 2023, with a $60 million green shoe, under a 144A private placement.
According to the press release, the notes will be convertible into cash, shares of Tilray’s Class 2 common stock or a combination of cash and shares of Tilray’s Class 2 common stock, at Tilray’s election. The interest rate, initial conversion rate, repurchase or redemption rights and other terms of the notes will be determined at the time of pricing of the offering.
In terms of use of proceeds, the Canadian pot company intends to use the net proceeds from this offering for working capital, future acquisitions and general corporate purposes, and to repay the approximately $9.1 million existing mortgage related to its facility in Nanaimo, British Columbia.
Why sell notes and not stock? Because that way, the company avoids immediate dilution while paying a token interest rate. Meanwhile, buyers of the converts benefit from the volatility in the stock, which has been – for lack of a better word – phantasmagoric ever since the company went public in July at $17/share.
Additionally, in its 8-K, the company made the following financial disclosures:
Tilray’s revenue for the three months ended September 30, 2018 is expected to be between $10.0 million and $10.5 million, compared to $5.5 million for the three months ended September 30, 2017.
In addition, as of September 30, 2018, Tilray’s cash and cash equivalents were between $117.5 million and $118.0 million, and our long-term debt (including current portion of long-term debt) was between $9.0 million and $9.5 million.
In kneejerk reaction to the news, the stock dropped as much as 10% before stabilizing 6% lower in after hours trading.
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