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- Hemp health product company Elixinol Global (EXL) is tapping investors for $11 million through an entitlement offer
- The one-for-2.51 offer prices new shares at 20 cents each — a hefty 48 per cent discount to Elixinol’s last closing price
- The company said the new funds will help support its cashflow and distribute its brand
- Still, Elixinol burned $9 million over the March 2020 quarter and before today’s entitlement offer has just $11 million cash on hand
- As such, shareholders might be worried the capital raise is too little, too late
- Shares in the company are in a trading halt until Wednesday but last traded for 38 cents each
Hemp-based health product maker Elixinol Global (EXL) is tapping investors for $11 million to bolster its balance sheet and keep building its brand.
The company announced a one-for-2.51 entitlement offer today under which new shares will be priced at 20 cents each. This is a hefty 48.1 per cent discount to Elixinol’s last closing price of 38.5 cents per share.
The entitlement offer will be opened to institutions first and retail investors this time next week.
However, though the $11 million might provide some much-needed cash to Elixinol, investors might be concerned that it’s too little, too late.
A steady decline
Elixinol has been steadily declining in quarter-on-quarter revenue since last year and taking its share price with it.
In its latest quarterly report, the company revealed $3.3 million in total revenue over the quarter. This is 25 per cent lower than the revenue pulled in over the December 2019 quarter.
In the March 2019 quarter, Elixinol made $8.2 million in revenue — more than double March 2020’s. In the December 2018 quarter, Elixinol’s revenue was $11.8 million.
Similarly, Elixinol’s share price on May 6, 2019, was $4.42 per share. Today, shares are selling for 38 cents each.
Nevertheless, Elixinol is clinging to a silver lining: the company’s sale of branded and co-branded products accounted for 82 per cent of total revenue this quarter compared to the 77 per cent of total revenue from the preceding quarter.
With the recent appointment of CEO Oliver Horn, who was previously CEO of Swisse Wellness, the company is hoping the new management can streamline the business and bring it out of the COVID-19 crisis and into profitability.
Oliver said the company is making great progress in evolving the business and relaunching its brand across global markets.
“We’ve secured wide-reaching distribution agreements due to our global reputation for high-quality broad-spectrum CBD [cannabidiol] products and 20 years of experience in the hemp industry,” Oliver said.
Despite ongoing challenges in the U.S. CBD market and COVID-19 hiccups, Oliver said the company is optimistic about its business outlook.
Short runway
Still, Elixinol burned $9 million in cash over the March quarter and entered the June quarter with just $11 million cash on hand.
This means at current spending levels — and even with the full proceeds from today’s entitlement offer — Elixinol has just over two quarters’ worth of cash in the bank.
Nevertheless, Elixinol said in its latest quarterly financial report it expects spending to be reduced in coming quarters from some recently-implemented cost-saving measures.
Elixinol shares are in a trading halt until tomorrow, so it is not yet known how investors will react to today’s news. Shares last traded for 38 cents each in a $53.09 million market cap.
