Greenlane Holdings Inc’s (NASDAQ: GNLN) highly dilutive offering sent its shares and the cannabis stock group plunging on Tuesday. The seller of cannabis accessories, childproof packaging solutions, and specialty vape vaporization products announced they were selling $25 Million worth of shares at $1.19.
Greenlane anticipates closing this transaction on February 19, 2025 and intends to use its net proceeds, together with existing cash, for repaying existing indebtedness, general corporate purposes and working capital needs.
As investors began investigating its details, shares fell 38% to close at 73 cents per share and MSOS ETF also decreased 6.6% on this news.
The offering comprises one share of common stock or pre-funded warrant, one Series A PIPE warrant to purchase one share at an exercise price of $1.4875 and two Series B PIPE warrants to acquire one share at an exercise price of $2.975.
Noteworthy is the flexibility afforded to investors through Series B warrants which allows “cashless exercise.” This form of exercising enables an investor to exercise his warrant without paying full cash price; they instead receive reduced share counts as compensation – something considered attractive by American Bar Association buyers.
Greenlane may have felt forced to do this so they could send the signal that investors weren’t interested in purchasing until there was some additional incentive, which suggests if warrant holders exercised them there wouldn’t be retail buyers willing to step in to keep the stock from selling off too rapidly – something which appears unlikely.
Anthony Varrel of The Dales Report commented on social media platform X that this financing deal had left him confounded, calling the company an outright dumpster fire.
Last month, Greenlane managed to restore compliance with NASDAQ exchange by adding three independent directors to their audit committee and reporting earnings of only $4.0 million compared to $11.8 million from last year – this represented an improvement by approximately $63,000 over its operating loss which stood at approximately 6.9 million last year.
At September 30th 2024, the company reported its earnings as an ongoing business venture and held approximately $2.3 million of cash – none was restricted nor held in foreign bank accounts – and approximately $25 million negative working capital at that point in time. Management at that time indicated they may lack enough resources to continue operations beyond Q4 of 2024 due to potential cash shortages.
Greenlane Holding’s offer causes a stock selloff – MEDCAN24
