Canopy Growth Establishes New US$200 Million At-The-Market Program

Rhea-AI Summary

Canopy Growth (NASDAQ: CGC) has announced a new US$200 million at-the-market equity program that enables the company to issue and sell common shares in concurrent public offerings in the United States and Canada. The shares will be sold at prevailing market prices through Nasdaq and TSX.

The net proceeds will be used for:

• Corporate investments and potential acquisitions
• Working capital and general corporate purposes
• Debt repayment, including an optional US$100 million prepayment that would extend the company's term loan maturity to September 18, 2027

The ATM Program will be effective until the earlier of the complete sale of shares, regulatory cessation, or July 5, 2026. BMO Nesbitt Burns Inc. and BMO Capital Markets Corp. will serve as agents for the program.

Positive

• Optional US$100M prepayment could extend loan maturity to 2027
• Flexibility to strengthen balance sheet through US$200M equity raise
• Multiple use of proceeds including M&A opportunities

Negative

• Potential shareholder dilution through new share issuance
• Shares to be sold at market prices, which may pressure stock value
• Indicates need for additional capital

Insights

Financial Analyst

Canopy Growth's new US$200 million ATM program represents a significant financial maneuver that could substantially impact the company's capital structure and future operations. With a current market cap of just $207 million, this program could potentially result in substantial dilution for existing shareholders if fully utilized, as it represents nearly 96% of the company's current market value.

The stated use of proceeds indicates three strategic priorities: debt reduction, cash position strengthening, and M&A support. Most notably, the company explicitly mentions potentially using funds for a $100 million prepayment on their existing credit agreement, which would extend their term loan maturity to September 2027 - providing breathing room on their debt obligations.

This financing approach offers Canopy flexibility by allowing them to raise capital gradually at market prices rather than through a traditional, potentially discounted secondary offering. However, ATM programs typically indicate a company needs additional capital but wants to minimize market impact of that fundraising.

For context, this move comes at a challenging time for cannabis companies dealing with regulatory hurdles and competitive pressures. The ATM program suggests management is prioritizing balance sheet improvement and financial flexibility while preparing for potential strategic acquisitions to strengthen their competitive position.

Corporate Strategy Expert

This ATM program signals a pivotal strategic shift for Canopy Growth focused on financial restructuring and positioning for opportunistic growth. By creating this capital-raising mechanism, management is essentially building a war chest that serves dual purposes: defensive balance sheet repair and offensive positioning for acquisitions.

The optional $100 million debt prepayment reveals a strategic priority to extend debt maturity by over two years to September 2027. This indicates management is taking proactive steps to address near-term debt obligations, which typically represents a significant risk reduction strategy for companies in challenging sectors.

On the M&A front, this financing structure provides Canopy with ready capital to pursue strategic acquisitions at potentially advantageous valuations in the current market environment. The cannabis industry is likely entering a consolidation phase where stronger players can acquire distressed assets or complementary businesses at favorable terms.

However, the timing and size raise important strategic questions. With shares trading at relatively low levels, any equity issuance comes at a high cost in terms of dilution. This suggests management views the benefits of financial flexibility and potential strategic opportunities as outweighing the dilution concerns. Investors should closely monitor both the pace of share issuance and the specific capital allocation decisions that follow to evaluate the effectiveness of this strategy.

Net proceeds expected to be used for corporate purposes including paying down debt, strengthening the Company's cash position, and supporting strategic M&A

SMITHS FALLS, ON, Feb. 28, 2025 /PRNewswire/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ: CGC), a world-leading cannabis company dedicated to unleashing the power of cannabis to improve lives, announced today that the Company has established a new at-the-market equity program (the "ATM Program") that allows Canopy Growth to issue and sell up to US$200 million (or its Canadian dollar equivalent) of common shares of the Company ("Common Shares") from treasury from time to time in concurrent public offerings in the United States and Canada. Any Common Shares sold in the ATM Program will be sold in transactions made directly on the Nasdaq or the TSX or on any other available U.S. or Canadian trading market for the Common Shares. The volume and timing of sales under the ATM Program, if any, will be determined in the Company's sole discretion and are subject to customary conditions precedent. The Common Shares will be distributed at market prices prevailing at the time of each sale or at certain other prices and, as a result, prices may vary as between purchasers and during the period of distribution under the ATM Program. 

Canopy Growth intends to use the net proceeds from the ATM Program, if any, for investments in businesses and/or to fund any potential future acquisitions and for working capital and general corporate purposes, which may include the repayment of indebtedness, including the optional US$100 million prepayment under the Company's existing credit agreement, which if completed, will automatically extend the maturity date of the Company's term loan to September 18, 2027.

Sales of Common Shares under the ATM Program will be made pursuant to the terms of an equity distribution agreement dated February 28, 2025 (the "Distribution Agreement") entered into among the Company, BMO Nesbitt Burns Inc., as Canadian agent, and BMO Capital Markets Corp., as U.S. agent (collectively, the "Agents"). The ATM Program will be effective until the earliest of (i) the issuance and sale of all of the Common Shares issuable pursuant to the ATM Program, (ii) the date on which the Company receives notice from a securities regulatory authority that the Canadian Shelf Prospectus and/or Registration Statement (each as defined below) has ceased to be effective, and (iii) July 5, 2026, unless terminated prior to such date by the Company or the Agents in accordance with the terms of the Distribution Agreement. It is expected that the Distribution Agreement will replace the equity distribution agreement dated June 6, 2024 among the Company and the Agents. 

The offering of Common Shares under the ATM Program is qualified by a prospectus supplement dated February 28, 2025 (the "Canadian Prospectus Supplement") to the Company's Canadian short form base shelf prospectus dated June 5, 2024 (the "Canadian Shelf Prospectus"), each filed with the securities commissions in each of the provinces and territories of Canada, and pursuant to a prospectus supplement dated February 28, 2025 (the "U.S. Prospectus Supplement") to the Company's U.S. base prospectus dated June 5, 2024 (the "U.S. Base Prospectus") included in its registration statement on Form S-3ASR (the "Registration Statement") filed with the U.S. Securities and Exchange Commission (the "SEC"). The Distribution Agreement, Canadian Prospectus Supplement and Canadian Shelf Prospectus are available on the SEDAR+ website at www.sedarplus.com, and the U.S. Prospectus Supplement, the U.S. Base Prospectus and the Registration Statement are available on EDGAR on the SEC's website at www.sec.gov. Alternatively, these documents may be requested from the Agents by contacting, (i) in Canada: BMO Nesbitt Burns Inc. by mail at Brampton Distribution Centre, 9195 Torbram Road, Brampton, Ontario, L6S 6H2, attn: The Data Group of Companies, by email at torbramwarehouse@datagroup.ca or by telephone at 905-791-3151 ext. 4312; and (ii) in the United States: BMO Capital Markets Corp. by mail at 151 W 42nd Street, 32nd Floor, New York, NY 10036, attn: Equity Syndicate Department, by email at bmoprospectus@bmo.com, or by telephone at 800-414-3627.

No securities regulatory authority has either approved or disapproved of the contents of this news release. This news release is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy the Common Shares, nor shall there be any sale of the Common Shares in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

About Canopy Growth

Canopy Growth is a world leading cannabis company dedicated to unleashing the power of cannabis to improve lives.

Through an unwavering commitment to our consumers, Canopy Growth delivers innovative products with a focus on premium and mainstream cannabis brands including Tweed, 7ACRES, DOJA, Deep Space and Claybourne, as well as category defining vaporization devices by Storz & Bickel. In addition, Canopy Growth serves medical cannabis patients globally with principal operations in Canada, Germany, Poland, and Australia.

Canopy Growth has also established a comprehensive ecosystem to realize the opportunities presented by the U.S. THC market through an unconsolidated, non-controlling interest in Canopy USA. Canopy USA's portfolio includes ownership of Acreage Holdings, a vertically integrated multi-state cannabis operator with operations throughout the U.S. Northeast and Midwest, as well as ownership of Wana Brands, a leading North American edibles brand, and majority ownership of Jetty Extracts, a California-based producer of high-quality cannabis extracts and clean vape technology.

At Canopy Growth, we're shaping a future where cannabis is embraced for its potential to enhance well-being and improve lives. With high-quality products, a commitment to responsible use, and a focus on enhancing the communities where we live and work, we're paving the way for a better understanding of all that cannabis can offer.

For more information visit www.canopygrowth.com.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Often, but not always, forward-looking statements and information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Examples of such statements and uncertainties include statements with respect to the offer and sale of Common Shares under the ATM Program, including the timing and amounts thereof, and the use of any proceeds from the ATM Program, including the optional prepayment under the Company's credit agreement and the maturity date of the Company's term loan.

Risks, uncertainties and other factors involved with forward-looking information or statements could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including negative operating cash flow; uncertainty of additional financing; use of proceeds; volatility in the price of the Common Shares; risks relating to the overall macroeconomic environment, which may impact customer spending, costs and margins, including tariffs (and related retaliatory measures), the levels of inflation, and interest rates; expectations regarding future investment, growth and expansion of operations; regulatory and licensing risks; changes in general economic, business and political conditions, including changes in the financial and stock markets; legal and regulatory risks inherent in the cannabis industry, including the global regulatory landscape and enforcement related to cannabis; additional dilution; political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation and the interpretation of various laws regulations and policies; public opinion and perception of the cannabis industry; and such other risks contained in the public filings of the Company filed with Canadian securities regulators and available under the Company's profile on SEDAR+ at www.sedarplus.com and with the SEC through EDGAR at www.sec.gov/edgar, including under the heading "Risk Factors" in the Company's annual report on Form 10-K for the year ended March 31, 2024, its subsequently filed quarterly reports on Form 10-Q and the Canadian Prospectus Supplement, Canadian Shelf Prospectus, U.S. Prospectus Supplement and U.S. Base Prospectus.

In respect of the forward-looking statements and information, the Company has provided such statements and information in reliance on certain assumptions that they believe are reasonable at this time. Although the Company believes that the assumptions and factors used in preparing the forward-looking information or forward-looking statements in this news release are reasonable, undue reliance should not be placed on such information or statements and no assurance can be given that such events will occur in the disclosed time frames or at all. Should one or more of the foregoing risks or uncertainties materialize, or should assumptions underlying the forward-looking information or statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The forward-looking information and forward-looking statements included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information or forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

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SOURCE Canopy Growth Corporation

FAQ

What is the size of Canopy Growth's new ATM program announced in February 2025?

Canopy Growth's new ATM program allows for the issuance and sale of up to US$200 million of common shares.

How will Canopy Growth (CGC) use the proceeds from the 2025 ATM program?

The proceeds will be used for investments, potential M&A, working capital, and debt repayment, including an optional US$100M prepayment to extend loan maturity.

When does Canopy Growth's 2025 ATM program expire?

The program expires on July 5, 2026, unless all shares are sold earlier or terminated by regulatory authorities or the company.

Which exchanges will CGC's ATM shares be sold on?

The shares will be sold on both Nasdaq and TSX (Toronto Stock Exchange) at prevailing market prices.