Zenabis Stock Drops After Raising $20 Million in Rights Offering

Zenabis stock

Zenabis stock is trading down on Friday after Zenabis Gloabl (TSX:ZENA) (OTCPK:ZBISF) announced that it had successfully raised $20.8 million USD by way of a rights offering.

High Demand for Rights Offering

Zenabis Global first announced plans to raise capital through a rights offering last month, which investors greeted with skepticism, as Zenabis stock dropped over 60% in the intervening weeks. The offering closed on Wednesday evening at 5 pm with Zenabis confirming that it was oversubscribed and will result in the issuance of a maximum of 139,086,624 common shares at a price of $0.15.

"Zenabis is grateful for the support shown by its shareholders in this over-subscribed rights offering by both the public market and insiders. To see an over-subscribed rights offering is a strong vote of confidence from the market," said CEO Andrew Grieve. While the demand for Zenabis shares in the rights offering may come across as a vote of confidence from the market, it could also be considered as investors taking advantage of a good deal, particularly given that the $0.15 per share price is well below Zenabis's current value of $0.23.

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Difficult Year for Zenabis Stock

The raised capital will now be used to fund Zenabis Global's operations going forward after the poor quarterly results reported earlier this month. Revenue halved to $12 million CAD, while sales in the propagation segment fell drastically from $17.4 million CAD to just $4.5 million CAD, with the company blaming growing cycles and the timing of orders for the drop in sales. Zenabis stock has struggled throughout 2019 in line with the broader problems of the industry, tanking over 95% since the beginning of the year.

It's not all bad news for Zenabis stock and its investors, though. The company expects to see its three sites at Atholville, Stellarton, and Langley reach full annual production capacity of 143,200 kg by the second quarter of 2020, adding to its already operational 3.5 million square feet of total facility space across Canada.

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