CannTrust Holdings Inc (TSE:TRST) Prices Securities At Discount

Benjamin A. Smith
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CannTrust Holdings Inc (TSE:TRST) (NYSE:CTST) (FRA:C9S) announced pricing of its previously-announced underwritten public offering today. Much to the surprise of investors, it didn’t materialize at 10-Day VWAP (over $7.10/share), rather, at a price that was that was significant below.

CannTrust’s offering of 36,363,636 common shares came at a price of $5.50USD. The company is selling 30,909,091 common shares in the offering for total gross proceeds of approximately US$170 million—with another 5,454,545 common shares offered separately. The underwriters have a 30-day option to purchase up to an additional 4,636,363 and 818,182 common shares, respectively, at the public offering price, less the underwriting discount.

The Company intends to use the net proceeds of the offering for general corporate purposes, international expansion, enhanced extraction capacity, upgrades for GMP Certification and biosynthesis development.

BofA Merrill Lynch, Citigroup, Credit Suisse Securities (USA) LLC and RBC Capital Markets are acting as lead book-running managers for the offering. Jefferies LLC and Canaccord Genuity LLC are also acting as book-running managers.

While the pricing of the offering is coming at a steep discount, it’s important to note there are no warrants attached to the offer; common is such transactions. Without these potential “sweetner” convertibles to attract investors, there was less incentive to purchase securities at prices closer to its recent median. This, despite the common tumbling ↓35.85% since March 27th—the day before the company issued Q4 2018 financial results. Currently shares are lower be another ↓10.09%, trading $0.29 above its public offering price.

Whether CannTrust’s sour undertones have affected the market broader today is unclear. Certainly, such low ball pricing—where investors demand a deep discount to participate—isn’t exactly a confidence booster for the sector. The Horizons Marijuana Life Sciences Index ETF is lower by ↓2.86%, with several Tier-1 and mid-major licensed producers taking it on the chin.

Midas Letter will have further coverage as events warrant.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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