While most investors are losing interest in the cannabis space, British American Tobacco, or BAT (NYSE: BTI) as it is now known, appears to be taking a deeper look now that valuations aren’t so lofty. The company this morning revealed that it has taken a stake in Charlotte’s Web Holdings (TSX: CWEB).
The stake comes from a US$56.8 million investment into Charlotte’s Web, which BAT is conducting via a subsidiary. The investment takes the form of a convertible debenture, which if converted, would equate to a 19.9% ownership position in the company. The debt is convertible at BAT’s discretion.
The debt is unsecured, and is set to mature November 14, 2029. Interest will accrue at a rate of 5% per annum, with a step-down feature included that would see the interest rate fall to 1.5% should the US change its laws surrounding CBD, allowing it to be used as an ingredient in food products and dietary supplements.
With the debenture amounting to C$75.3 million, the debt will convert at a price of $2.00 per share.
BAT will have the right to nominate directors for 20% of the board, while they also maintain certain top-up rights and certain pre-emptive rights related to the issuance of shares.
“The appeal of Charlotte’s Web is clear to us: a wide portfolio of high-quality products, strong brand equity, an extensive retail presence and robust B2C e-commerce platform serving a loyal US consumer base, and a track record of in-depth scientific research,” said Kingsley Wheaton of BAT.
The investment follows BAT taking a 19.9% stake in Canadian producer Organigram back in early 2021.
Following the investment, Charlotte’s Web is said to have pro-form cash and short term investments of US$65 million.
Charlotte’s Web last traded at $0.87 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
