Green Thumb Industries Stock Down – Company Closes Financing Deal

Green Thumb Industries

Shares of Vancouver's Green Thumb Industries (CSE:GTII)(OTXQX:TGODF) are down almost 4% to press time. The company announced the closure of a $105 million USD "senior secured non-brokered private placement financing through the issuance of senior secured notes".

It's very probable that investors are troubled by this news. 

Green Thumb Industries Down on Financing Deal

GTI is a cannabis consumer packaged goods company and parent company of retail chain Rise.

The capital raised will be used for "general working capital, various growth initiatives" along with culling existing debt, as per the press release.

GTI Founder and CEO Ben Kovler said further:

"The proceeds will fuel our aggressive growth plans for faster route-to-market in key markets like New Jersey, as well as pursue expansion opportunities that broaden the reach of our brand portfolio.”

Green Thumb Industries Financing

When a company looks for external financing, it can suggest several things that may worry investors. The most obvious is that the company needs capital. Perhaps, it can't raise it through its own sales and is potentially struggling if so.

Another is that it is too ambitious—consider this:

It is possible that it has enough capital to operate but is far too ambitious with its expansion and operational plans and is willing to risk devaluing shareholders current position in order to "grow".

Often, offering thousands of shares to the financer dilutes the current value of shareholders position in the company and this rarely bodes well for the investor in the short term. The long-term can tell a different story, however. If management executes the capital expenditure wisely then this financing deal may result in long-term gains further down the line.

The Take-Away

Further details on Green Thumb Industries financing deal are as follows:

"Notes have a maturity date of May 22nd, 2022 and will bear interest from the date of issue at 12% per annum, payable quarterly, with an option, at the discretion of the Company, to extend an additional 12 months"

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And further:

"The financing permits the Company to borrow an additional $45 million over the next six months...The purchasers of the Notes also received 1,822,771 warrants. Each Warrant is exercisable to purchase one subordinate voting share of GTI at an exercise price of CDN$19.39 per share, for a period of 60 months from the date of issue".

But what are your thoughts on this? Do you think investors should expect this in the early days of this newly legalized industry in Canada? Perhaps, there's no alternative? Will Green Thumb Industries stock suffer further from this?

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