October 24, 2018 / 6:27 PM / 25 days ago

U.S. pot firm Curaleaf to triple planned equity offering -sources

TORONTO (Reuters) - U.S. cannabis retailer Curaleaf Holdings Inc is raising about $400 million, almost three times its original target, in Toronto, in a deal that would value the company at close to $4 billion, people familiar with the situation told Reuters. 

The move by the Wakefield, Massachusetts-based company, which also owns cannabis cultivation operations, comes ahead of going public on Monday in what will be one of Canada’s largest reverse takeovers. Documents available to potential investors listed the target issue size as $150 million.

Curaleaf’s strong showing comes as cannabis stocks are taking a beating over concerns that the sector is overvalued. The Horizons Marijuana Life Sciences Index ETF (HMMJ.TO) tumbled 6.1 percent on Wednesday, leaving it 30 percent down from an all-time high it hit the day before Canada legalized recreational cannabis on Oct. 17.

Curaleaf will raise the equity through a private placement that converts to a public company.

The cannabis industry saw a flurry of capital raisings and mergers ahead of the legalization of recreational marijuana in Canada.

The offer is set to be priced at C$11.45 per subscription receipt, near the top end of the previously disclosed range of C$8.56-C$11.47 per receipt, according to one of the people. A subscription receipt can be exchanged for the underlying security upon the deal’s closing.

Curaleaf’s fundraising is among the biggest equity offerings in the sector and has attracted more than 100 institutional investors, one of the sources said.

The offer is expected to be priced as early as Wednesday, the people said.

An external spokesman for Curaleaf declined to comment. The sources declined to be named as the matter is not public.

Reverse takeovers (RTOs) allow companies to go public by rolling into a listed shell corporation and typically have a faster timeline than a traditional initial public offering.

RTOs have emerged as the preferred route for most U.S. cannabis companies seeking to go public.

Curaleaf’s listing will be the biggest-ever RTO on the Canadian Securities Exchange (CSE), the exchange said.

Curaleaf, which owned 28 dispensaries in nine U.S. states as of Sept. 7, is turning to Canada as a federal prohibition of cannabis in the U.S. makes raising capital there a challenge. It expects to increase the number of dispensaries in its network to 41 by the end of the year.

Currently, 49 companies with U.S. cannabis interests are listed on the CSE, out of a total 106 marijuana issuers, according to data from the exchange. U.S. cannabis listings on the CSE by RTO this year include retail chain MedMen Enterprises (MMEN.CD) and Green Thumb Industries (GTII.CD).

Even though marijuana remains illegal under U.S. federal law, the United States is the world’s biggest cannabis market, with California alone expected to have sales of $5.1 billion this year, according to Arcview Market Research. Companies are eager to get a slice of that pie.

Investment banks GMP Securities and Canaccord Genuity are leading the offering.

Reporting John Tilak and Nichola Saminather; Editing by Denny Thomas, David Gregorio and Diane Craft

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