Canopy will use the net proceeds for working capital and general purposes.
Canadian cannabis producer Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC) announced Wednesday that it secured approximately $50 million in new financing, marking its second capital raise in recent months as the struggling company looks to improve liquidity and pay down debt.
Under the deal with an unnamed institutional investor, Canopy will issue a five-year convertible debenture worth C$96.4 million ($71 million) paying 7.5% annual interest. The debenture can be converted to Canopy common shares at C$14.38 per share.
Canopy will also issue the investor 3.35 million common share purchase warrants exercisable at C$16.18 per share over 5 years. The agreement restructures around C$27.5 million ($20.3 million) in debt coming due in September 2025.
Canopy said it will use the $50 million in net proceeds for working capital and general purposes.
The Canadian cannabis producer raised about $35 million in January through a private placement at $4.29 per unit. That earlier capital raise was intended to improve liquidity and reduce debt as losses mounted.
Canopy has been weighed down by persistently low wholesale pricing and profitability challenges in its core Canadian recreational market. It lost C$216 million in the quarter through December 2023.
Management has undertaken cost cuts and debt reduction efforts over the past few years as the company waits on the U.S. market to open up to the regulated cannabis industry. In 2022, Canopy acquired edibles brand Wana and multistate operator Acreage Holding to establish a future foothold south of the border.
The convertible debt deal could provide Canopy a financial bridge as it looks to downsize its cash burn.
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