Immediately after delaying the timeline on finishing building of the Zenabis Langley facility to preserve cashflow, Zenabis Global Inc. (TSX: ZENA) nowadays announced a rights supplying intended to raise up to $20.eight million. 

Zenabis is performing this raise to make certain they can spend for operations till cannabis sales are anticipated to produce cashflow in mid-2020.

The deal has lots of moving components so we have supplied a guide under to assistance investors figure out their selections.


What are the Economics

There are two classes of investors right here, these who personal Zenabis stock nowadays and these who do not.

If you personal Zenabis stock you have two selections:

  1. Sell your ideal in the open marketplace and pocket the money.
  2. Spend $.15 for a new share betting you can sell it for a larger profit than in selection 1. 

    Subscribe for a New Share If:

    (Present share price tag – $.15) is higher than (the price tag of the ideal x 1.5x)

If you do not personal Zenabis stock you have two selections:

  1. If you can go quick, quick the shares, then obtain 1.5x that quantity of rights in the open marketplace and spend for your new share. After you have the share in hand use it to close out your quick position and pocket the distinction.

This is what hedge funds are performing with Zenabis ideal now and is a zero threat way to make income. At a stock price tag of $.30/sh the rights should really trade for $.10/sh. Any more affordable and a lucrative extended/quick trade can be place on creating a threat-no cost profit.

  1. If you can not quick the stock your subsequent greatest selection would be:

    Acquire the Rights If

    (Price tag of the ideal x 1.five + $.15) is significantly less than the price tag of the stock.

We know this is complex, but complication creates chance.

With the stock only trading for $.30, promoting a ideal for even $.03 is nevertheless a 10% acquire.

We feel existing investors will be pleased to sell their rights beginning Oct. 30, producing a predicament exactly where bargains will be discovered.

Mark your calendars for the 30th and have your trading screens open for the reason that there could be some fireworks.


Explaining the Rights Providing

Below the terms of the supplying, any existing holder of a widespread share will acquire a transferable ideal. A single and a half rights can be employed to buy a widespread share for $.15, more than 70% under exactly where the stock was trading at the starting of the day. 

Shareholders who do not want to take portion in the supplying can take no action and enable their rights to expire, or these rights can rather be sold on the Toronto Stock Exchange.

We do not see why any investor would let rights with actual worth expire worthless so we anticipate any active owners of Zenabis stock will either sell their rights or subscribe for new shares at $.15.

If the supplying is completely subscribed 139 million new shares will be issued, escalating the existing share count by 66%.  

If the complete supplying is not purchased out by existing shareholders, Chief Executive Officer Andrew Grieve and Director Natascha Kiernan have committed legally to buy 800,000 shares or .six% of the total supplying.

Other insiders, in a non-binding style, mentioned they will obtain 41 million of the shares or 29.five% of the supplying.

Insider backing of this deal is crucial to show investors management is prepared to place far more skin in the game to retain Zenabis solvent.

The rights will commence trading on the TSX on Oct. 30 and will cease trading at 12 noon on Nov. 27.

Anybody who desires new shares desires to provide the rights and $15 for every single 1.five rights to their broker by five:00pm EST on Nov. 27.

Commenting on attempting a significantly less dilutive way of raising extra capital the corporation mentioned:

Liquidity is an crucial resource provided the existing state of the Canadian cannabis marketplace. Though Zenabis does not at the moment will need the proceeds from the rights supplying to provide on its revised company strategy, the corporation believes obtaining excess money on hand is in the greatest interest of shareholders.

That revised company strategy incorporated the announcement about slowing building on the Langley facility, as nicely as revealing the existing Zenabis Atholville facility really created far more item than initially projected. Atholville’s cultivation output final month hit 2,089 kg of dried cannabis. 

In other corporation news, Zenabis recently inked a cultivation deal with Tantalus Labs Ltd. Below the terms of that newly-inked deal, Zenabis will develop cannabis from clones supplied by Tantalus, just after which Tantlus will manage the drying and packaging processes ahead of item is shipped to retail outlets. 

Joining the ranks of main licensed producers such as Organigram, Aphria, Aurora, and The Supreme Cannabis Corporation, Zenabis was in addition chosen as a companion to deliver PAX compatible vape pods for PAX Labs, Inc. 

Vape and edible solutions are anticipated to commence hitting shelves in December just after final regulations have been handed down from Wellness Canada.