Elixinol Global Limited (ASX: EXL) is in the healthcare industry based in Sydney, Australia. The company has a global presence in the cannabis industry and manufacture products like hemp food and wellness products, hemp-derived CBD dietary supplements etc. It also has the rights to cultivate cannabis for medical use which it uses to manufacture medicinal cannabis products.
On 24th April 2019, the company announced that it has signed an agreement to acquire 25% equity stake in Altmed Pets LLC (Trading as Pet Releaf) through its wholly-owned subsidiary, Colorado-based Elixinol LLC. This agreement states that the company is increasing its investment in the high-growth cannabidiol (CBD) pet products market.
Pet Releaf is an established leader in the pet brand for hemp-derived CBD oils, topicals and treats for pets. The company sells its products in over 4000 pet stores across the USA and globally. The company’s financial performance is also up to the mark as it generated revenue of approximately US$8.1 million in FY18 which was significantly up by FY17 revenue of US$2.8 million. In fact, the revenue growth has been so consistent that it recently achieved its 16th consecutive revenue growth quarter.
Details of the deal
Elixinol LLC is to acquire 25.43% of Altmed Pets LLC for the total consideration of US$6.25 million. This includes US$4.35 million in cash which will account for 17.7% stake and US$1.90 million in shares of the company (for the remaining 7.7% stake) that translates to 523,437 newly issued fully paid ordinary shares which will stand equal to the same class of existing shares. The issue price has been set at A$5.09 per ordinary share which will amount to a total of A$2,666,123.60. The issue price is derived on the basis of 15-day Volume Weighted Average Price (VWAP).
Valuation of the deal
As per the ASX listing rule 7.1A.3, the company cannot issue new shares with the issue price being less than the 75% of the 15 days VWAP of the same class of shares on which trades in that class were recorded immediately before:
- a) the date on which the price at which the securities are to be issued is agreed; or
- b) the date on which the securities are issued if securities are not issued within five trading days
The 75% of 15 days VWAP of the same class of security prior to the transaction Date comes out to $3.8201. This means the issue price of A$5.09 per ordinary share is approximately 33% than the lower bound price of $3.8201 per share, which satisfies above mentioned ASX listing rule. This issue price is also quoted at a premium of approximately 175% to the $1.85 per share issue price at which Elixinol completed a capital raising for $40 million in September 2018.
On 23rd April 2019, the company posted Q1FY19 results and operational updates wherein it posted a good increase on 21% in revenue. The company also purchased a land worth A$2.6 million for the subsidiary Nunyara which it confirmed on 7th February 2019.
The market capitalisation of the company is A$630.22 million. The 52 week high and low of the stock is A$5.93 and A$1.35 respectively. The stock is trading lower by 3.75% at A$4.87 after making an intraday low of A$4.80 as of 24th April 2019 (AEST: 01:31 PM).
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