It appears even insiders at Zenabis Global (TSX: ZENA) view its current rights offering as troubling for the future of the firm. Former CEO Kevin Coft filed his first sales of the equity for 2019 this evening, indicating that he has sold 2.6 million shares of the firm as of late, or approximately a third of his total holdings. Coft currently serves as Zenabis’ Chief Facilities Officer.
The sale of 2.6 million shares of Zenabis Global by Coft occurred over a two day period, with two million being sold to the public markets on October 28, and a further 600,000 being disposed of on October 29. The dates specifically are key, as October 29 was the day before Zenabis began trading “ex-rghts”. This means that Coft willingly disposed of 2.6 million shares two days before he was set to receive rights to effectively acquire .66 shares of Zenabis Global per share held.
Total proceeds from the sale of Coft’s shares on the open market are estimated at $641,020.00. The estimated proceeds from the sale are more than what would be required to exercise the rights associated with his remaining shares.
To add to the situation, an insider of the firm had just completed selling a third of his position on the day that Zenabis management hosted a call to quell shareholder concerns related to the financing. Within that call, Zenabis management outlined that sales forecasts have fallen short as a result of the governments enforcement on black market activity not being strong enough, forcing Zenabis and its competitors to not have ideal product pricing conditions. Management then went on to indicate that the rights offering, while conducted at over a 70% discount to prevailing equity pricing conditions, was a prudent move in the current market climate as a result of there not being any associated debt with the financing.
Kevin Coft was not indicated as being one of the insiders that would be exercising his common share purchase rights upon the rights being assigned.
Zenabis announced the rights offering on October 24, while trading at $0.48 on the Toronto Stock Exchange. The rights offering allows current shareholders to receive one right per common share, with the record date being October 31, 2019. Each one and one half right allows the holder to purchase one common share of the equity at $0.15 per share. The result of which will be the firm raising approximately $20.8 million, while diluting the equity by 66% if all rights are converted.
Insiders are expected to subscribe for approximately 30% of the rights offering, committing $6.2 million in total for the conversion of rights.
Zenabis rights are currently trading under the ticker “ZENA.rt” on the Toronto Stock Exchange. The rights expire at 5:00 PM on November 27, 2019.
Zenabis Global closed today’s session at $0.20 on the TSX.
Information for this briefing was found via Sedar and Zenabis Global. 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.
