Auxly Stock Jumps as Imperial Brands Exercises Top-Up Rights

Auxly stock

Auxly stock is moving higher this morning after Imperial Brands exercised its pre-emptive right to buy shares of Auxly Cannabis Group Inc (TSXV:XLY) (OTCQX:CBWTF).

Key Details

2019 will almost certainly end as a disappointing year for cannabis companies, amidst sinking stock prices and other sector-wide troubles. However, there have been some companies that have had some positive developments in recent times, and Auxly Cannabis Group is the latest among such cannabis firms.

In a new development, it has emerged that Imperial Brands has taken up the option of topping up its investment in the company. The top-up is part of the agreement that had been reached between the two companies back in July when Imperial decided to invest $123 million in the Canadian cannabis firm.

According to that agreement, Imperial would be allowed to top-up its investment if its stake in the company was diluted in any way. After the top-up, Imperial will continue to hold the originally agreed 19.9% stake in Auxly. In the latest transaction, Imperial Brands invested an additional $5.2 million in Auxly Cannabis Group in exchange for 6,315,574 common shares in the company.

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5,400,614 shares were subscribed at a price of $0.81 each, while the rest of the 914,960 shares were subscribed at a price of $0.91 each. Auxly has not revealed how it is going to allocate this fresh capital.

Auxly stock is trading higher by 4% at $0.6350 CAD.

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Q3 Earnings Recap

Auxly Cannabis Group has not had a great time in recent months, and that was reflected in its third-quarter results, which were announced in November. In the third quarter, the company managed to generate $1.61 million in revenue, which reflected a significant 41% drop from the second quarter.

Auxly stated that one of the reasons behind the company’s dramatic drop in revenue was due to the fact that it had decided to pivot towards the production of second-generation cannabis products. The negative gross profit for the period stood at $0.96 million. Expenses shot up to $22.96 million from $16.15 million in the previous quarter.

Auxly stock is down over 40% from its 52-week peak price.

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