Canadian Cannabis Producer Cronos Group to Raise $100 Million

March 21, 2018 at 6:17 pm

Breaking News by Alan Brochstein, CF

After the close, Canadian Cannabis producer Cronos Group (TSXV: CRON) (NASDAQ: CRON) filed a Form F-10 with the SEC, indicating that it is planning to sell shares in the United States in a deal of unspecified size that will be underwritten by GMP Securities, as lead underwriter, and BMO Nesbitt Burns Inc.  The offering could represent the first time a Canadian cannabis producer has sold shares in the United States in a public offering. Cronos recently became the first Canadian LP to get listed on the NASDAQ.

While the size of the deal hasn’t yet been disclosed, the preliminary prospectus suggests that it will be at least $15 million, with $10 million supporting the company’s capital expenditures required to support its business in Australia and $5 million earmarked for Israel. The company has prepared the prospectus to conform to Canadian disclosure requirements, and it states that the offering price will be in Canadian dollars only but that shares will be offered in Canada, except for Quebec, and the United States. The company currently has 161.6 million shares outstanding.

Shares of Cronos Group, which surged in late February on the NASDAQ listing, closed at C$10.30 in Canada and $8.00 in the United States, trading slightly lower in the after-hours trading in the U.S., with the last trade at $7.80 at the time of publication of this article.

Canadian Cannabis (1)

Note: As we were publishing, the company issued a press release indicating that the offering, a bought deal, is C$100 million. The deal is expected to close April 6th and consists of 10.42 million shares being sold at C$9.60, with an over-allotment option of 1.563mm shares that, if exercised, would boost the offering to C$115 million.

Before this cannabis stock news is here, it’s published to subscribers on 420 Investor.

Breaking News by Alan Brochstein, CFA

Canadian Cannabis Alan Brochstein, CFA

Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the Canadian cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

The Canadian government passed the Marijuana for Medical Purposes Regulation (MMPR) in 2013 to revamp the outdated medical marijuana system. In April 2014, MMPR official replaced the previous Marijuana Medical Access Regulations. With the new law, Canada established a licensing program that allowed authorized producers to produce and market dried or fresh Canadian cannabis flower, and oil, to Canadians with the required medical documentation. The new law did provide guidelines for individuals to continue to grow marijuana for their own personal use and framework for transitioning providers from the old medical marijuana regulations to the new.

Under MMPR, Canada has seen significant requests for marijuana producers’ licenses. As of May 2017, the government had received 1,665 requests for licenses. Of those, 428 applications were in progress, 265 had been refused, 858 were returned due to being incomplete and 69 had been withdrawn.

Announcing Canadian Cannabis recreational legislation in April 2017, Prime Minister Justin Trudeau fulfilled his campaign promise to seek the full legalization of marijuana. The legalization of marijuana is expected to be in effect by mid-2018. Canada will be only the second country to fully legalize marijuana, after Uruguay.

The legislation divides the responsibilities of legalization between the federal and provincial governments. Ottawa will regulate production, including licensing producers and ensuring the safety of the country’s cannabis supply. The federal government has stipulated that buyers must be at least 18 years old, but provinces will be able to set a higher age limit if they wish. Those who want to grow their own cannabis will be limited to four plants per household. Canadians will be allowed to carry up to 30 grams of dried cannabis for personal use.

 

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The way I see it is Cannabis is going to be a 30 plus billion dollar industry in just a very short time. Think of how big it’s going to be in 20 years. The possibilities are endless.  Pure 710