The Supreme Cannabis Company (TSX: FIRE) finally announced the inevitable this morning, with the company blowing out its share structure as it looks to remove debt from its balance sheet. The company has issued a total of 116.6 million common shares in exchange for the early conversion of $63.5 million in outstanding convertible debentures, originally due to mature in October 2021.
While the company did not disclose the exact conversion rate for the debt, the numbers provided indicate that the exchange rate was at roughly $0.54 per common share, a premium to the current share price of $0.23. However, half of those shares issued will be free trading upon exchange, while the other half are subject to a four month lock up provision. The implication is that its possible a large portion of those free trading shares will hit the market as investors look to retrieve some capital from the exchange.
As a result of the early conversion, Supreme has managed to reduce the outstanding principal on its outstanding convertible debentures from $100 million to $36.5 million. The remaining portion will also see its maturity date extended to September 1, 2025, from that of October 19, 2021. However, the interest rate will climb from the current 6.0%, to nearly double at 11.06%.
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Further, the remaining debt has seen its conversion price reduced drastically, from $2.45 per share to $0.285 per share, with Supreme having the right to force conversion if they the company sees its volume weight average trading price exceed $0.45 for a period of ten days.
Amendments are expected to occur by September 1, 2020. The firms outstanding share count as a result is expected to rise from 354.7 million, to that of 471.3 million – a rise of nearly 33%.
Supreme Cannabis last traded at $0.23 on the TSX.
Information for this analysis was found via Sedar and Supreme Cannabis. 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.
