Tilray Inc. (NASDAQ: TLRY) has done what many companies do after a very large stock move. It is raising cash. The cannabis company is planning to raise roughly $400 million by offering convertible senior notes.
After a serious run-up, it is typical for companies to raise capital. Tilray signaled that it plans to use the net proceeds from the capital raise for working capital, to fund future acquisitions and for general corporate purposes. Another use was to repay the approximately $9.1 million existing mortgage related to a facility in Nanaimo, British Columbia.
Tiray announced that the notes will have a five-year term, due in 2023 if not converted. The offering will be subject to market conditions and other factors and will be made in a private placement to qualified institutional buyers (pursuant to Rule 144A under the Securities Act of 1933). Also noted in the press release is that these notes will be sold to accredited investors in Canada and that it will grant an option to the underwriters to purchase up to an additional $60 million worth of notes.
While the notes will be convertible into cash or Tilray common shares, this was said to be at Tilray’s election. The company also went on to say:
The interest rate, initial conversion rate, repurchase or redemption rights and other terms of the notes will be determined at the time of pricing of the offering.
For whatever this is worth, the actual convertible price has a chance of becoming rather important. Those convertible prices can act as a peg for some company’s stock prices, if the offerings become too large for the market to reasonably absorb. That said, a $400 million offering is probably easy enough to absorb considering that its market cap is $14.6 billion and that this would not even be the equivalent of 3 million new shares at the current trading price. Tilray has been averaging many more shares than that per day since its IPO this summer.
Tilray’s shares rose 13.5% to $156.83 on Wednesday ahead of the financing news, and its shares were down 5% at $149.01 in the after-hours on Wednesday afterward. Tilray’s 52-week trading range is $20.10 to $156.96.