Shares of Canopy Growth Corp. were cut down Wednesday, back into penny-stock territory, after the Canada-based cannabis company registered roughly 46 million shares for sale to the public.
The U.S.-listed stock
tumbled 12.4% in morning trading, putting it on track for the first sub-$1 close since Sept. 8.
In an S-1 filing with the U.S. Securities and Exchange Commission, the company registered up to 45.86 million common shares for sale, with all of the shares held by selling shareholders.
The shares registered include 22.93 million common shares and 22.93 million shares underlying warrants to buy common shares.
The filing comes two days after the company announced a private placement with institutional investors of up to $50 million to boost liquidity. The placement was for 22.9 million units, with each unit equal to one common share and one warrant to buy a common share.
The S-1 filing registers all the shares, if the institutional investors exercise all the warrants to buy stock, for sale.
With the private placement, Canopy Growth took advantage of a massive rally in its stock price, as investors expressed optimism that cannabis would be rescheduled in the U.S. as a safer drug and that favorable banking regulations are on the horizon.
In the 10 sessions from Aug. 28 through Sept. 11, the stock skyrocketed 333.3%. Since then, it has has tumbled 46.2%.
Despite the selloff, Alliance Global Partners analyst Aaron Grey said momentum for favorable banking legislation could prove an additional upside catalyst for the cannabis sector. He said the Secure and Fair Enforcement (SAFE) Banking Act, which would make it easier for banks to work with cannabis companies, currently sits in the Senate Banking Committee and is scheduled for mark-up on Sept. 27.
“Overall, we look for the committee to advance the bill to the full Senate next Wednesday, with the question then being the ability to secure 60 votes in the full Senate and the timing of when Senate Majority Leader Chuck Schumer might put the bill up for a vote,” Grey wrote in a note to clients.
The AdvisorShares Pure US Cannabis exchange-traded fund
rose 1.2% in morning trading Wednesday.
Year to date, Canopy Growth shares have tumbled 61%, while the cannabis ETF has rallied 17.5% and the S&P 500
has advanced 15.9%.