Pot stock Althea raises another $6m to pursue multi-channel strategy

Medical cannabis company Althea Group (ASX:AGH) announced a new capital raise this morning.

The company said it’s raised another $6m via a share placement to sophisticated investors. It also expects to raise another $3m from eligible retail shareholders via a share purchase plan.

Althea completed the share placement by issuing 13,636,364 new shares priced at 44c each, a discount of 10.2 per cent to yesterday’s close of 49c. Shares in the company were unchanged in morning trade.

Capital deployment

Based on AGH’s projections, the funds will be allocated evenly across a range of different business functions.

More than one-third of the new funds ($3.7m) will go towards research and development for low-dose CBD products.

The company said it’s prioritising Australian CBD products that can be sold via pharmacy channels as a Schedule 3 drug, pending the TGA’s final ruling (currently scheduled at some point in December) on down-scheduling.

“If CBD is not down-scheduled, funds will be allocated to the remaining Research & Development items,” Althea said.

The company said it also plans to carry out more R&D on “a range of Cannabis Health Products (CHPs) for sale in Canada”.

Althea’s Canadian subsidiary, Peak Processing Solutions, recently secured a distribution deal for its range of cannabis-infused beverages — a deal AGH said is expected to bring it revenues of around $105,000.

Althea acquired Peak for $5.8m after raising $30m from investors in July 2019 at $1 per share, a 122 per cent premium to the issue price of today’s share placement.

The company also said it plans to allocate $2m towards increasing the headcount in its sales team, with more “in-field representatives educating doctors about Althea medicinal cannabis”.

And it wants to spend around $2m on building up product inventory — part of a plan to ensure it has sufficient stock to meet 3-6 months of forecast sales at any one time.

As part of the share placement, Althea advised that its substantial shareholder, Aphria Inc, had initiated an off-market transfer of 12.25m shares in the company (equal to a 5.25 per cent stake) at 41c per share.

The transfer marked Aphria’s exit from the company, following the execution of a block trade in October 2019 where it sold 36.697 million non-escrowed AGH shares at 40 cents each.