Cannabis MSO Acreage aims to raise $10M million

A day after Canadian cannabis company Canopy Growth Corp. exercised its option to acquire Acreage Holdings, the American multistate operator announced a private placement with institutional investors to raise $10 million.

The offering, priced at $833 per unit, is expected to close by Thursday and subject to customary closing conditions, according to a Wednesday news release.

The proceeds are earmarked for working capital and general corporate purposes as Acreage faces what it called “deteriorating financial” conditions.

Defaulting on loans

Acreage said in the release it has explored numerous funding options the past several months “to continue ongoing operations” and “service its outstanding debt obligations.”

Citing a lack of funding options, unfavorable market conditions and high debt, Acreage said it has defaulted on outstanding debt obligations.

On April 20 and May 10, the company said, it received a default letter notice on loans due in January 2026.

Canopy Growth reached an agreement in April 2019 to acquire New York-based Acreage.

The acquisition is part of Canopy’s expansion into the United States.

The Smiths Fall, Ontario-based company created Canopy USA, a U.S.-domiciled holding company, in 2022 to facilitate its move into the American marijuana market.

‘Sufficient funding’ lacking

Acreage painted a bleak picture if it fails to secure funding immediately.

“The company currently does not have sufficient funding to continue as a going concern, and therefore, if the offering is not completed, and no alternative arrangements are secured, there is significant doubt about the company’s ability to continue,” the release noted.

“If this offering does not proceed, there is significant doubt that management will be successful in securing alternative funding or that management will have sufficient time to implement any alternative transaction.”

As part of the offering, each investor in the private placement will have the right to require Canopy USA to purchase the notes and warrants if:

• The acquisition is not completed 15 months from the private placement closing date.
• The acquisition is terminated at any time before the maturity date.
• The company has an insolvency issue.

When the acquisition closes – likely in the first half of 2025 – Canopy USA will own 100% of the issued and outstanding shares of Acreage.