Canadian Weed!

[JohnCM]

Charlotte’s Web Plans $100 Million IPO

August 27, 2018

California-Based Cannabis Edibles Company Plus Products Files For IPO

Charlotte’s Web, the cannabis company responsible for turning CNN’s Dr. Sanjay Gupta into a medical marijuana believer has filed for an IPO worth C$100 million. Priced at C$7.00 a share, the company and the selling shareholders will be receiving gross proceeds of $93,185,050 and $6,914,950, respectively.

Late last week, Charlottes’ Web Holdings, Inc., announced an offering for an aggregate of 14,300,000 common shares, which consisted of a treasure issuance by the company of 13,312,150 shares, and a secondary offering of 987,850 common shares. The common shares are being offered for sale by Canaccord Genuity Corp, acting as lead underwriter.

15 Canadian shareholders have entered into an underwriting agreement with Charlotte’s Web Holdings, Inc, following a public offering of common shares within Canada in the company.

Charlotte’s Web Holdings Inc is the exclusive provider of Charlotte’s Web. The high-quality hemp CBD extract was created by Stanley Brothers (now SEDAR), and gained infamy as little Charlotte Figi, turned to the CBD extract for relief from daily seizures. Charlotte has gone on to live a healthy, happy, and active life, and Charlotte’s Web has become one of the most noted CBD-rich cannabis strains in the cannabis market. The products of the company include tinctures, capsules, and topical products.

The company had $40 million in revenue for 2017 for a 35% EBITDA margin. This is a 172% growth over 2016’s revenue of $14.7 million. E-commerce sales have grown by 60% from 2016 to 2017 and it is sold in 2,700 retail locations. The product has 14% of the market share and is the number one brans by market share.

With regards to the legality of hemp, the company said in its filing, “The Company’s position is that its activities fall within the relief from federal interference (e.g. by the DEA) provided by Section 7606 of the 2014 Farm Bill. However, the statute does not explicitly state that private businesses, such as the Company, may cultivate or conduct commercial sales of Industrial Hemp or products derived therefrom. Rather, Section 7606 specifically allows for the ‘‘growing or cultivation of Industrial Hemp’’ for the ‘‘purposes of research’’ pursuant to state ‘‘pilot programs’’ conducted by ‘‘institutions of higher education and State departments of agriculture’’.”

CWB grows its proprietary hemp on farms leased in northeastern Colorado and sources high-quality hemp through contract farming operations in Kentucky and Oregon. CWB has cultivation plans for approximately 300 acres of irrigated farmland from ten farms in three states for the 2018 growing season, of which, 165 acres are expected to be planted with CWB’s proprietary hemp genetics during the 2018 calendar year. Management believes these 300 acres will produce an estimated 250,000 to 350,000 pounds of Industrial Hemp during the 2018 harvest period (dependent on the regional yield variables associated with growing Industrial Hemp).

Selling shareholders have allowed Canaccord Genuity Corp an over-allotment option to purchase up to an aggregate of 2,145,000 common shares at the offering price. This is exercisable in whole or in part for a period of 30 days of the closing of the offering, expected to occur on or about August 30, 2018.

Following closing, common shares will commence trading on the Canadian Securities Exchange under the symbol “CWEB”. The CSE has conditionally approved the listing of common shares, subject to fulfilling requirements.

Aiko Trust, CK&J Irrevocable Trust, Master and A Hound Irrevocable Trust, Paulina Irrevocable Trust, Tristan 2 Arlo Irrevocable Trust, Blue Water Irrevocable Trust, J. Austin Stanley, Arvesa Corp., Kristi Fontenot, Little Sis Trust, Lynn Kehler, Proverbs 31 Woman Irrevocable Trust, M, C and C Special Needs Trust, Graham Carlson and Old Faithful Trust are among the shareholders that have gone into an agreement with the underwriting company.

A copy of the Prospectus can be found on SEDAR at www.sedar.com