Canopy Growth Corporation (TSX:WEED) (NASDAQ: CGC) has entered into an exchange and subscription agreement with a single institutional investor under which the Ontario-based company is expected to receive gross proceeds of roughly $50 million and exchange approximately CA$27.5 million ($20 million) of existing debt maturing in September 2025 for a new senior unsecured convertible debenture of the company maturing five years following the day of issuance.

The Deal Details

Under the terms of the deal, the investor will acquire a convertible debenture in an aggregate principal amount equal to CA$96,358,375 on closing.

Canopy will issue to the investor an additional 3,350,430 of its common share purchase warrants, with each warrant entitling the holder to acquire one common share of the company at CA$16.18 per common share during the five years following the closing of the agreement.

The convertible debenture will carry interest at a 7.50% annual rate, payable in semi-annual payments in cash or, at the option of the company, in common shares for the first four semi-annual interest payments following the closing. Moreover, it will be convertible into common shares at the option of the investor at CA$14.38 per common share.

Why It Matters

Canopy said it will use the net proceeds from the offering for working capital and general corporate purposes.

Meanwhile, Canopy recently announced that its shareholders voted to approve the spin out of Canopy USA, which will accelerate Canopy's entry into the U.S. market and allow the company to move quickly to acquire its U.S. assets in Wana Brands, as well as Jetty and Acreage.

See also: Canopy Growth's Big Step Toward Entry Into US Cannabis Market As DEA Rescheduling Looms

At April's Benzinga Cannabis Capital Conference in Florida, Canopy Growth CEO David Klein commented on the company's efforts to enter the U.S. cannabis market.

"I don't think our investors understand the value that sits inside of Canopy. I don't think we get any credit for Wana," Klein told the crowd. "I don't think we get any credit for Jetty or Acreage and I think this new structure will allow us to demonstrate that as we go forward."

The 19th Benzinga Cannabis Capital Conference is returning to Chicago this Oct. 8-9. Get your tickets now before prices surge by following this link.

What's Next

The closing of the offering is slated to take place during the week of May 6, 2024, and is subject to customary closing conditions.

On the closing date, Canopy will enter into a registration rights agreement with the investor under which the company will agree to file a registration statement with the U.S. Securities and Exchange Commission (SEC) within 45 days following the closing, covering the resale of the common shares underlying the convertible debenture and the warrants.

Now read: Canopy Is 'Cautiously Optimistic' On Cannabis Rescheduling Following Major Step Toward Entry Into US THC Market

CGC Price Action

Canopy Growth's shares traded 0.98% lower at $10.24 per share during the pre-market session on Friday morning.