Aurora Cannabis Inc. (TSX:ACB) has increased its ownership interest in Hempco Food and Fiber Inc. (TSXV:HEMP) to ~35% after exercising warrants
SmallCapPower | March 29, 2018: Hempco Food and Fiber Inc. (TSXV:HEMP) announced on Monday that Aurora Cannabis Inc. (TSX:ACB) has exercised 10,558,676 warrants to buy Hempco common shares for total proceeds to Hempco of $4.3 million. As a result of the exercising these warrants, Aurora Cannabis’ stake in Hempco increased to ~35%, which corresponds to owning 21,117,352 common shares of Hempco.
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Hempco CEO Diane Jang said, “With this further investment by Aurora we are now very well capitalized to accelerate our various strategic initiatives to drive growth at Hempco. Since taking the helm at Hempco, we have made a number of tactical and strategic moves that position the company well to take advantage of a number of opportunities in the health lifestyle food supplements market, as well as for the pet and equine markets. Additionally, with the positive vote on the second reading of Bill C-45 in the Senate, implementation of the new Cannabis Act is that much closer, which would position us very well for whole-plant utilization and further acceleration of our business plan. These funds, and the presence of a large, stable shareholder, put Hempco in a strong position to pursue a multitude of opportunities and create further shareholder value.”
Previously, Aurora Cannabis had bought 10.6 million units from Hempco for $3.25 million on September 18, 2017. Each unit would be equivalent to one common share and one common share purchase warrant, which was eligible for conversion to one Hempco share for a period of 24 months at $0.41 price. Additionally, there was an accelerator clause added at the time of deal permitting Hempco to hasten the warrant terms to 30 days in case the share price exceeds $0.65 for 30 successive calendar days.
Aurora Cannabis CEO Terry Booth remarked, “This additional investment in Hempco was anticipated from Day 1 of our strategic partnership. We are pleased with the work done by Diane and her team, and look forward to supporting Hempco’s growth initiatives and capitalizing on the multiple opportunities this partnership creates for us. In addition to the warrants exercised, we intend exercising our option to buy founder shares, and take our position to north of 50%.”
Recently, Hempco has entered into a distribution agreement with Kane Veterinary Supplies for Hempco’s Praise line of hemp animal supplements for the canine and equine markets. Through Kane Vet, one of the leading wholesale distributor and manufacturer catering to the veterinary, pet, agricultural and equine markets across Canada, Hempco will get access to strong retail network of about 1,900 pet stores.
Hempco’s stock currently trades at a market capitalization of $76.83 million on the TSXV with a price-to-book multiple of 10.0x. Post the announcement, the Company’s stock surged 42% on the TSXV to close at $1.53 on Monday.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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