Earlier, we reported on Organigram’s (TSE:OGI, NASDAQ:OGI) Q2 2020 earnings which raised some concerns about the company’s cash position.
Now, as we feared and warned investors about earlier, the company has announced today that it is doing a at-the-market equity raise program valued at $49M.
In particular, the company is burning through around $46M every quarter and only has $41M remaining in its bank account, and would have run out of money by May 2020 if they didn’t do this equity raise.
Organigram previously had C$50 million left to borrow on this facility from BMO, but now that the company is in violation of its covenants, we think it’s unlikely the bank will let them draw down that money.
Clearly, the debt financing option has become very difficult to pursue for OGI so that may be the reason why they are going the route of equity raise.
For further reading, take a look at the analysis that we put out on Organigram’s latest quarter.
This program means that the company has been given the greenlight to issue more shares and sell them at market price to raise more cash. This would further dilute current shareholders and increase the amount of shares outstanding by more than 15% at current market prices.
This would put even more downwards pressure on the stock for the near term since if the stock price increases, the company is sure to try and capitalize on the situation by selling more shares.
Shares of OGI are down about 2.0% today at the time of this writing.
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