Elixinol Global (ASX:EXL) has raised $50m from professional investors, making it the second largest capital raising among Australian pot stocks since Cann Group (ASX:CAN) took $60m in 2017 to build its growing facilities.

Elixinol raised $40m in September last year to spend on international deals and $20m during its IPO in January 2018.

But by the end of March they only had $27m left, after buying out a Japanese subsidiary in November and as it seeks to maintain its place in the increasingly competitive US hemp market.

CEO Paul Benhaim says the latest money is a “warchest” that will give them the financial firepower to do deals with the “large companies” in the US currently approaching them for product.

Bell Potter led the sale of 12.8m new shares, or 10 per cent of Elixinol’s pre-raising shares on issue, at $3.90 each, an 8.7 per cent discount to the last close on Monday.

*That* cash burn

Elixinol was one of the first ASX pot stocks to make serious money and has won a legion of supporters in the Australian investment scene.

But a slide in revenue and a jump in cash burn in the March quarter rallied the naysayers.

Industry researcher The Green Fund was sceptical about both the financial runway the company could maintain, given the numbers it produced in April, and the lack of updates around the unnamed customers Elixinol says it’s talking to.

Benhaim says they’re focused on ridding the company of low-margin deals and refuse to undercut themselves to win business.

He told Stockhead that while they don’t give guidance on run rates, the last quarter’s cash burn was an anomaly brought about by needing to commit to stock that will be used for the rest of the year. He says costs are going up.

For the two prior quarters the company’s cash burn was around $20m.

Spend money to make money

The new money will be spent on US expansion ($32m) which includes doubling production facilities in Colorado by an extra 23,000 square feet; acquisitions and other opportunities in Europe, South America and Asia ($8.2m); and working capital ($7.4m).

“There have been opportunities continually coming to Elixinol Global for acquisitions. We haven’t made any decisions on them as a number haven’t passed our due diligence,” Benhaim said.

He hopes at least one of those will come off.

Featured Companies

You might be interested in