Organigram Announces $49M At-The-Market Equity Program

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.

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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.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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Andy Zhou: Andy Zhou graduated from the University of Waterloo in Ontario, Canada, in 2019 with an bachelor’s degree in mathematics (honors). Throughout his time at university, he took on various internships at many major Canadian companies, including the Royal Bank of Canada and Loblaw. In October 2016, he enrolled in the university’s official stock simulator game, StockTrak run by the Faculty of Mathematics. By the time of his graduation, Andy ranked fourth out of 535 participants, with a total portfolio net return of 98 percent. In the last year of university prior to his graduation, he founded and led the UW FIRE Club, where he led discussions and debates on all topics related to finance and investing.
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