July 28, 2021
Subs -
WE ARE LIVE.
Qualified Canadian Readers Only.
It’s cold outside.
Not literally of course - humid and damp are better words to describe the outdoor weather right now. Luckily, our favourite institutions - bars - are back in the indoor dining business, ready to serve us $10+ vodka sodas / G&Ts at all sorts of hours of the night. I will have to revisit my King Street tear sheet, as I am noticing a fair amount of places have exchanged hands / rebranded. But in any case, it’s certainly good to be back.
The “cold” I’m talking about refers to, unsurprisingly, the new issue market. As I mentioned in last week’s update, it is becoming increasingly tough to get deals across the line. Though volatility has somewhat subsided from last week’s highs, I doubt risk appetite will pick up fast enough to save some of the beleaguered deals that are in the market right now.
Hank Payments Corp. is a good example. Cantor and Gravitas originally went up on this deal on June 16 as a best efforts $10M private placement of subscription receipts in connection with an RTO. On July 26, the company issued a new term sheet with the following revisions:
Base deal downsized to $5M from $10M
$1.00 strike price for warrants for 3 years, from a prior strike of $1.40 for 2 years
Talk about a tough crowd. Halving your base deal is enough of a gong show. Tack on the fact that these warrants are now struck at the money. I seriously wonder who will be on the other side of these trades when / if this issue closes. Simply put: this is a banker’s deal now. Not a surprise coming from Gravitas.
Cantor’s foray into Canada, however, appears to be hitting a little bit of a rocky patch. Understandable somewhat, given the extent to which the cannabis market has cooled over the past few months. But even in what is supposed to be their “bread & butter” coverage sector they have been facing similar problems.
Cannabis retailer Shiny Bud Inc. went up to market as a best efforts private placement of subscription receipts in connection with an RTO on June 18, co-led by Cantor and Echelon. The revised terms, which came in on July 6, were as follows:
Issue price downsized to $8.00/sub receipt from $11-$12/sub receipt
Base deal downsized to $10M from $15M
Warrant coverage increased to full coverage from half coverage
Strike Price reduced to 15% premium from 25% premium
Yikes! Those are some seriously material changes. At least those warrants are out of the money. I can’t imagine management being too happy with these chain of events. If it’s any consolation to Cantor, this will make a nice tombstone to add to their 3Q21 tear sheet (which, if it exists in the first place, I will be on the lookout for).
When you’re at your next social event - whether it be at your favourite restaurant, at the dinner table with your family, or alone at your desk with Teams notifications pinging in the background - remember that you’re fortunate. Remember that, bad as things may get, you’re not subject to a -50% reprice with broker warrants struck at the money. Remember that.
ECM World
Top 5 Notable Transactions
Cybin Inc.
$30M Overnight Marketed Supplement of Commons
Cantor w/ CG
Hank Payments Corp.
$5M (revised from $10M) Private Placement of Sub Receipts (1 sh + 1 wt)
$1.00 strike for 3-years, revised from $1.40 for 2-years
Cantor w/ Gravitas
Tidewater Renewables Ltd.
$125M IPO of Commons
Scotia w/ Stifel, Tudor, EWP, IA, Infor, Paradigm
Spartan Delta Corp.
$150M SFP Bought of Sub Receipts (1 sh)
National
Marwest Apartment REIT
$3.5M (revised from $5M) Marketed of Units (1 trust unit + 1 wt)
CG
With Conviction,
G.G.