Zenabis Announces Rights Offering to Raise Up To $20.8 Million

Published: October 25, 2019

Zenabis Announces Rights Offering to Raise Up To $20.8 Million

Zenabis Global Inc. announces that it will be offering rights to holders of its common shares of record at the close of business on October 31, 2019. The Rights Offering is intended to raise up to $20.8 million, assuming full uptake. Insiders of Zenabis have committed to acquire 30% of the Common Shares available under the Rights Offering for a total of $6.2 million, representing strong participation. The remaining Common Shares are available for all other shareholders.

Full details of the Rights Offering are included in a Rights Offering circular, which will be filed today under Zenabis’ profile on SEDAR at www.sedar.com. The circular and related materials will also be mailed to registered holders of Common Shares as of the Record Date.

Rights Offering Details

Pursuant to the Rights Offering, each holder of Common Shares will receive one transferable right (a “Right”) for each Common Share held. One and a half (1.5) Rights will entitle a holder to purchase one (1) Common Share at a price of $0.15 (the “Subscription Price”) per Common Share. The Subscription Price is equal to approximately an 73% discount to the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (the “TSX”) for the 5-day period ending on October 23, 2019.

A maximum of 139,086,624 Common Shares will be issued pursuant to the Rights Offering, representing 66.6% of the currently issued and outstanding Common Shares. The Rights Offering will be open to holders of Common Shares who are residents in Canada. No fractional Common Shares will be issued.

Each common shareholder resident in Canada may either:

  • Exercise their Rights and subscribe for additional common shares;
  • Sell their Rights (the Rights will be traded on the TSX under the ticker ZENA.RT as outlined below); or
  • Do nothing and let their Rights expire

Rights Offering Benefits for Existing Shareholders

Zenabis believes the Rights Offering is in the best interest of existing shareholders for the following reasons:

  • Liquidity is an important resource given the current state of the Canadian cannabis market;
  • Although Zenabis does not currently need the proceeds from the Rights Offering to deliver on its revised business plan as released on October 21, 2019, the Company believes having excess cash on hand is in the best interest of shareholders;
  • Founding shareholders and insiders expressed strong interest in contributing over $6 million in incremental equity capital to the business, rather than being diluted by third-party capital;
  • A Rights Offering allows the participation of existing shareholders alongside insiders (reducing dilution when compared to an alternative form of capital raise which would prevent the participation of the full shareholder base); and
  • Zenabis believes this is the least dilutive manner to raise incremental capital given current market conditions (incremental equity is also preferable as a capital source compared to a debt alternative given the quantum of Zenabis’ existing debt outstanding).

Rights Offering Description

A Rights Offering notice (the “Notice”), together with a Rights certificate, will be mailed to registered holders of Common Shares as of the Record Date. Full details of the Rights Offering, including information regarding the distributions of the Rights and the procedures to be followed, are included in the Rights Offering circular.

To subscribe for Common Shares, a completed Rights certificate, together with payment in full of the Subscription Price for each Common Share subscribed for, must be received by the subscription agent for the Rights Offering, Computershare Investor Services Inc., prior to the expiry of the Rights at 5:00 p.m. (Toronto time) on November 27, 2019. Shareholders who own their Common Shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.’

The Rights and the Common Shares issuable upon exercise of the Rights will be listed on the TSX. The Rights will be listed for trading on the TSX beginning on October 30, 2019 under the symbol “ZENA.RT”. Trading in the Rights on the TSX will cease at 12:00 p.m. (Toronto time) on November 27, 2019.

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