Zenabis Stock Drops as Ex-CEO Dumps 37% Stake

Zenabis Stock

Zenabis stock is down nearly 25% since it was revealed that Zenabis Global’s (TSX:ZENA) (OTCPK:ZBISF) former CEO and current Chief Facilities Officer, Kevin Coft, has sold 2.6 million shares right before a rights offering.

Zenabis Stock Down 60% Since Ex-Rights Announcement

Coft sold 37% of his stake in Zenabis stock over a two day period between October 28 and 29, just one day before Zenabis Global began trading a controversial rights offering. Zenabis announced the offering on October 24, which will allow shareholders to receive one right per common share, in order to raise $20.8 million USD as the company struggles for capital due to Health Canada’s lack of action against the black market.

Zenabis stock was trading at $0.49 on the Toronto Stock Exchange at the time of the announcement but has since fallen over 60%. The offering will entitle investors to purchase one common share at $0.15 but will dilute the stock by 66%. This means that Coft dumped 2.6 million shares just two days before he was set to receive rights to effectively acquire an extra 0.66 shares of Zenabis per share held.

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Black Market Undercutting Legitimate Sales

To further exacerbate the issue, an insider sold off a third of their holdings in Zenabis stock on October 29 just as the company held a conference call to address investors’ concerns ahead of the ex-rights offering. On that call, current CEO Andrew Grieve said that the company has fallen short of its sales forecast due to industry headwinds, which have impacted pot stocks across the board. Grieve highlighted the issue of black market prices undercutting legitimate sales as the primary factor in the company’s struggles.

In a press release, the firm indicated it does not need the cash planned to be raised for its current operations but argues “having excess cash on hand is in the best interest of shareholders.” While the company has defended its decision to commit to the ex-rights offering, Director of Corporate Communications Jonathan Anthony said that the decline in Zenabis stock is “outside our control.”

Zenabis Global rights are currently trading under the ticker “ZENA.rt” on the Toronto Stock Exchange. The rights expire at 5:00 PM on November 27, 2019.

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