Tilray Brands Inc.’s share price dropped in the extended session Thursday after the cannabis company filed a convertible note offering to buy back older ones before they convert to stock, a month after it announced an all-stock acquisition of rival Hexo Corp.
Shares of Tilray
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fell about 20% after hours, following a 2.5% decline to close the regular session at $2.36. Meanwhile, the S&P 500 index
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finished Thursday up 0.9%. Should shares open Friday down that much and remain unchanged, however, it won’t be the stock’s first 20%-plus daily beating.
Since Tilray went public in July 2018, the stock has had six sessions where it has closed down more than 20%, the last being the stock’s worst one-day performance ever, on Feb. 11, 2021, when shares plummeted 50% after U.S. legal reforms on the legal status of cannabis slowed.
Late Thursday, the company said it was issuing $150 million in senior convertible notes due in 2027, with underwriters Jefferies and B. of A. Securities getting a 30 -day option for an additional $22.5 million.
In a statement, the company said the offering will result in lower interest payments and have “fewer covenant restrictions than our non-convertible debt options due to the conversion option value,” and would be less dilutive than a secondary offering of stock.
Read: Up in smoke: $60 million marijuana startup co-owned by rapper was a Ponzi scheme, feds say
Based on Thursday’s closing price, $172.5 million represents about 73 million shares. Tilray has about 618 million shares outstanding. At the end of February, the company reported having $165 million in cash and cash equivalents, $89.4 million in long-term debt, and $223.1 million in “convertible debentures payable.”
The company said it was using a portion of the proceeds to help pay down debt, or to buy back some 5% convertible senior notes due in 2023, and 5.25% ones due in 2024, with the rest going for general corporate purposes. At the same time, Tilray said that with “certain holders of the 2023 notes and/or 2024 notes,” it will buy back “a portion of such notes on terms to be negotiated with such holder.”
Tilray stock after hours (in yellow) Thursday following the announcement. FactSet
The offering comes a little more than a month after the company agreed to buy peer Hexo
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in an all-stock, $56 million deal expected to close in June, and Tilray swung to a loss for the February-ending quarter.
At Thursday’s close, Tilray shares were down 12.3% year to date, compared with an 8.1% gain on the S&P 500
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