HEXO Prices $140M Public Offering, Plans to Enter U.S. through SPV
HEXO Prices $140M Public Offering, Plans to Enter U.S. through SPV
NJ Governor appoints Cannabis Regulatory Commission Director. Poseidon invests in C15 Solutions (Quality Management Solutions Provider). TerrAscend Increases Ownership of New Jersey License to 87.5%.
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🌿Industry
Cannabis firms catch a whiff of opportunity in Brazil. International cannabis companies are showing interest in Brazil, both its large consumer market for medicinal products and a proposal that could legalize planting of the crop. Major producers like Colombia's Clever Leaves and Canada's Canopy Growth are developing and selling medicinal cannabis products to a Brazilian consumer segment estimated at 10 million to 13 million people. This results from a 2019 regulatory change allowing the import, sale and manufacturing of such products. But permission for cultivation of hemp and cannabis in Brazil would be a bigger prize. If granted, the industry could blossom in four to five years, based on the experience of other countries such as Colombia. A proposal that would legalize cultivation was approved in June by a congressional committee. Lawmakers are weighing if it could be fast-tracked to the Senate for approval. If passed there, President Jair Bolsonaro would have to sign it into law. While Bolsonaro's far-right positions may seem an unlikely match for the bill, the proposal has support from some members of the powerful farm sector, a key constituency that helped him win the 2018 election.
Nevada cannabis consumption lounges on pace to open in 2022. Nevada’s cannabis industry will have a new way to reach consumers with marijuana consumption lounges planned to open next year, a potential boon to businesses in a state that annually receives a large influx of tourists. The state Legislature in June approved a bill that created two types of licenses for cannabis consumption lounges. Nevada’s casinos and hotels don’t allow cannabis use on-site, so marijuana lounges would provide options for visitors and for Nevada residents who live in apartments or other housing situations not conducive to marijuana consumption. The Independent reported that 59 dispensaries have expressed interest in opening consumption lounges. According to the news outlet, the Interim Finance Committee approved the allocation of $10.9 million for the Cannabis Compliance Board to hire 23 full-time employees. Those positions would handle the licensing of consumption lounges, compliance checks, background checks and determining lounge suitability, among other duties.
Canada’s retail cannabis sales grow 1.7% to C$318.7M in June, another record. Retail sales of legal adult-use cannabis in Canada increased to C318.7M ($246.9M) in June, growing more than 1.7% from the previous record set in May. June cannabis sales and monthly growth in selected Canadian metropolitan areas were:
Toronto: C$43.7 million (+4.9%)
Montreal: C$24.8 million (-2%)
Edmonton: C$19.8 million (-2.4%)
Calgary: C$15.2 million (-4.6%)
Vancouver: C$14.4 million (-1.4%)
Ottawa: C$12.1 million (+13.3%)
Winnipeg: C$8.5 million (+1.3%)
💵Deals
HEXO — $140 Million Public Offering. HEXO priced its previously announced overnight marketed public offering of units of the Company. The underwriters have agreed to purchase 47,457,628 Units at a price of $2.95 per Unit for total gross proceeds to the Company of ~$140 million, before deducting underwriting commissions and Offering expenses. Each Unit will be comprised of one common share of the Company and one half of one common share purchase warrant of the Company. Each Warrant will be exercisable to acquire one common share of the Company for a period of five years following the closing date of the Offering at an exercise price of $3.45 per Warrant Share, subject to adjustment in certain events. The Company expects to use the net proceeds from the Offering to satisfy a portion of the cash component of the purchase price payable to the Redecan shareholders on closing of the Redecan acquisition and for expenditures in relation to the Company’s U.S. expansion plans. Shares of HEXO plunge (27.5%) after public offering news.
The company created a special purpose vehicle to invest in the U.S. market while remaining onside with regulatory requirements from the Toronto Stock Exchange and New York Stock Exchange that forbid Canadian cannabis companies from operating in the U.S., which still deems marijuana to be federally illegal, Hexo CEO Sebastien St-Louis said in an interview with BNN Bloomberg. While St-Louis didn't identify which company Hexo was looking to invest in, he said he will bring the same technology the company uses to manufacture its pre-roll and hash cannabis products to California, rather than investing directly in a U.S. multi-state operator.
TerrAscend — Increases Ownership of New Jersey License Ahead of Adult-Use Rollout. TerrAscend has completed the acquisition of an additional 12.5% of the issued and outstanding equity of TerrAscend New Jersey from BWH NJ, LLC and Blue Marble Ventures, LLC, for an initial cash payment of $25 million with an additional $25 million payment comprised of a combination of cash and TerrAscend common shares to be paid on or before December 31, 2021. As a result, the Company now owns 87.5% of the issued and outstanding equity of TerrAscend New Jersey.
Poseidon Invests In Quality Management Solutions Provider C15 Solutions. C15 Solutions, a quality management solutions provider for the cannabis sector and a technology partner of Veeva Systems Inc (NYSE: VEEV), has completed a Class A preferred share equity financing with Poseidon Investment Management. Terms of the deal were not disclosed. Customers include Curaleaf, GTI, Jushi, HEXO, Mile High Labs and Auxly. “C15 has partnered with global eQMS leader Veeva Systems to build a customizable platform for the cannabis industry. In working directly with operators to address their specific needs across cultivation, manufacturing, and retail, C15 has forged a strong reputation not only for its platform but for its customer service.” Poseidon Managing Director, Michael Boniello told Benzinga.
📄Company Updates / Earnings
SOL Global — CEO Acquires Stock to Increase Personal Holding to 10%. Andy DeFrancesco, CEO of SOL Global announced that on August 18, 2021, he acquired ownership of 330,700 common shares in the capital of SOL Global on the CSE at an average price of CAD$3.59 per Common Share and an additional 300,000 Common Shares from one arm’s length vendor in a private transaction at a price of USD$3.30 per Common Share. The completion of the Transactions resulted in an increase from ~0.97% to ~2.18% in DeFrancesco’s security holding percentage of the issued and outstanding Common Shares on a non-diluted basis. DeFrancesco owns 3,112,000 deferred share units (DSUs) and 1,400,000 performance share units (PSUs). The DSUs and PSUs may be settled for Common Shares at the sole discretion of the Company. Assuming that all of the DSUs and PSUs are each settled for one Common Share, DeFrancesco will own 10% of the issued and outstanding Common Shares on a partially-diluted basis.
🏬Retail
3Fifteen — Primo Cannabis Continues Expansion Over Mid-Missouri. 3Fifteen Primo Cannabis brings medical cannabis to the North Hampton area of St. Louis. The new dispensary at 5501 Chippewa Street, is the first dispensary to open in the area. It comes as the third location for the Mexico, MO native owner and CEO, Jason Corrado. The brand will expand to a total of 5 locations throughout Missouri.
🌱Product
Why Eating Cannabis-Infused Shrimp Chips With My Mom Was Shockingly Great. The bag of shrimp chips proudly proclaims that the chips are “Grandma approved.” The olive oil used to fry the shrimp chips are also a part of Potli’s pantry line that includes chili oil, Sriracha, and apple cider vinegar. The chips were invented during a Lunar New Year gathering by Kevin Madrigal, a chef and friend of CEO Felicity Chen, who saw some leftover olive oil as a perfect opportunity for frying. Party goers who ate the chips, including Madrigal himself, left in a state of bliss—which confirmed to Chen they had a great new product on their hands that directly reflected her own identity.
🧔People | 💻Hiring
NJ Governor appoints director within Cannabis Regulatory Commission. Governor Phil Murphy appointed Wesley McWhite III as the Director of Cannabis Regulatory Commission’s Office of Diversity and Inclusion. McWhite currently serves as policy manager for the Hyacinth AIDS Foundation of New Jersey. He previously served the organization as Development Manager and as a Policy and Development Associate. He also served as a Homeless Outreach Specialist with the Volunteers of America and as Deputy Chief Operating Officer of the New Hope Baptist Church. The appointment will further advance the Murphy Administration’s commitment to establish an adult-use cannabis market that prioritizes equity, the governor’s office said in a news release. McWhite’s office will be in charge of establishing and administering unified practices and procedures for promoting participation in the medal cannabis and personal use cannabis industries by people from socially and economically disadvantage communities, the release stated. His office will conduct advertising and promotional campaigns to increase awareness on the industry.
Coda Signature — Financial Controller (Denver)
🎙️Interviews
High Rise — New Jersey adult-use coming soon, a deep dive into beverages, and some MSO strategy news
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