Tilray Brands Inc. experienced a drop in their share price during extended session hours after a convertible note offering was filed by the cannabis company for buying back older notes before they convert to stock. This move comes a month after the company announced an all-stock acquisition of its rival company, Hexo Corp. As a result, Tilray’s shares fell by about 20%, following a 2.5% decline to close the regular session at $2.36. Meanwhile, the S&P 500 index finished Thursday up 0.9%.
According to reports, since Tilray went public in July 2018, the stock has logged six sessions where it has closed down more than 20%, and the stock’s worst one-day performance ever was on February 11, 2021, when shares plummeted 50% after US reforms on the legal status of cannabis slowed.
On Thursday, the company announced that 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 to offer an additional $22.5 million. Tilray explained that the offering would result in lower interest payments and fewer covenant restrictions than their non-convertible debt options due to the conversion option value. This move will be less dilutive than a secondary offering of stock.
Tilray has about 618 million shares outstanding and, based on Thursday’s closing price, $172.5 million represents about 73 million shares. At the end of February, the company had $165 million in cash and cash equivalents, $89.4 million in long-term debt, and $223.1 million in convertible debentures payable.
The company plans to buy back 5% convertible senior notes that come due in 2023 and 5.25% ones due in 2024, with a portion of the proceeds and the rest for general corporate purposes.
On April 10, Tilray reported after the close of markets it swung to a loss for the February-ending quarter and offered to acquire Hexo in an all-stock, $56 million deal expected to close in June. Tilray shares closed down 8% the next session. Meanwhile, shares of Hexo had surged 30.2% on April 10 before the announcements and dropped 26.8% during the April 11 session, according to FactSet data.
Tilray shares were down 12.3% year to date, compared with an 8.1% gain on the S&P 500.
