Cresco Labs stock is in the red this week after the Chicago-based cannabis firm announced that it had secured US$200 million in debt financing from a consortium of lenders.
Financing Terms
Cresco Labs Inc (CSE:CL) (OTCQX:CRLBF) said it intends to use the new financing to expand operations in its home state of Illinois, finance pending acquisitions, and fund other growth initiatives. Cresco expects to draw the first US$100 million before the end of January, with the remaining amount up to a maximum of US$100 million to be agreed upon at a future date. The interest rate for the initial amount of up to $100 million is roughly 12.7% to 13.2%, depending on payback terms. Cresco Labs stock has dropped about 6.5% since the financing was announced.
Illinois is a key market for Cresco after the state launched its adult-use program at the beginning of the year. The company operates several of its Sunnyside dispensaries in Illinois, as well as the maximum three cultivation and processing facilities. "We will have the scale and capacity to effectively capitalize on the dramatic increase in demand for cannabis expected next year. We continue to have the leading share of the Illinois medical-use cannabis market,” said CEO Charlie Bachtell back in September. Cresco Labs stock is currently trading for $7.99.
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Cresco Labs Stock Boosted By Acquisitions
Acquisitions have been a pivotal part of Cresco's strategy over the last few years. Earlier this month, it completed its long-awaited takeover of Origin House to form one of the largest cannabis firms in the US, and before that, Cresco acquired Florida’s VidaCann Ltd. for US$120 million, which provided the company with access to two-thirds of the US legal market.
The company is also in the process of acquiring Tryke Companies for US$282.5 million, which it describes as the "final major piece of our targeted footprint." Upon closing, that deal will give Cresco access to over 70% of the US addressable cannabis market. While Cresco Labs stock may have dropped over 60% between April and November, recent weeks have seen the pot stock fare much better, gaining 33% since early December.
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