Cannabist Co Hldgs Inc (CBSTF)

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Cannabis companies pivot to debt to raise capital as stock prices lag
2/3/22 2:49 PM ET (MarketWatch)Print
By Steve Gelsi

Columbia Care issues $185 million and Trulieve raises $75 million as debt issuance outpaces equity raises by cannabis companies.

Columbia Care Inc. and Trulieve Cannabis Corp. announced separate debt deals in recent days as cannabis companies turn away from issuing stock to raise capital in the face of weak share prices.

Columbia Care on Thursday said it closed a hefty debt offering valued at $185 million from a private placement with unnamed investors. The debt was priced at 9.5% in the form of senior secured first-lien notes due 2026.

Meanwhile, Trulieve Cannabis on Jan. 28 said it closed a $75 million private placement of 8% senior secured notes due 2026. The deal marked its second tranche of senior notes following a $350 million debt offering that closed on Oct. 6.

Canaccord Genuity Corp. led the debt deals for both Trulieve and Columbia Care.

Trulieve CEO Kim Rivers she's seen healthy debt appetite from investors, particularly in the larger multi state operators.

"Given the current trading levels for our stock and the attractive rates for debt, issuing this second tranche made sense," Rivers said. "The cost of capital is coming down as investors gain increasing comfort with industry and collateral and market dynamics. U.S. multi-state companies have built real businesses that are generating operating cash flow."

Unlike their Canadian counterparts that remain in the red, Trulieve managed to post third-quarter net income in November.

At the same time, Trulieve's stock is down nearly 17% so far in 2022 and off by 49.3% in the last 12 months. Columbia Care stock has fallen about 1% in 2022 and more than 59% in the last 12 months.

Overall, cannabis stocks remain weak with retail investors as U.S. legalization stalls, despite growth in the number of states with medical or adult use programs. Just this week, Mississippi became the 37th state with a medical use program.