June 30, 2021
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With the extra long weekend right around the corner, my expectation was for a slow week leading-up. With risk capital coming back in vogue, this week was nothing short of interesting and exciting from a capital markets perspective.
Tuesday morning Columbia Care announced the closing of its US$74.5M convertible debenture offering. The deal was led by Canaccord Genuity and completed on a marketed private placement basis - a noteworthy execution structure for a transaction of this type. I view this raise as pretty material for the US MSO market given the strong demand for a cannabis convert priced up 25% with a 6% coupon.
CloudMD announced the closing of its Oncidium acquisition and secured a series of credit facilities for up to $62M. The transaction fundamentals don’t make me flinch, rather the participants involved. Echelon acted as financial advisor to CloudMD - no surprise there given the longstanding relationship. Although, little know firm KES 7 Capital acted as financial advisor to Oncidium. For those not fully aware, KES 7 pops up every once in a while on smaller, more niche transactions. KES 7 was founded by Mark Christensen and Lorne Sugarman, former GMP Securities bankers. The shop is nimble and has advised or transacted on a variety of mandates, including their very own real estate LP. As KES 7 puts it “Predicting rain doesn’t count. Building arks does” - looking forward to monitoring more activity from the folks at KES.
Early last week eBuyNow announced the closing of its QT with CE Brands Inc. on the TSXV. Concurrent to its go public, eBuyNow raised $17.25M of sub receipts (1 sh + 1 wt) led by Integral Wealth, Echelon, and Research Capital (formerly Mackie Research). A syndicate of retail-focused brokers. The company is in the business of using data analytics to manufacture and sell consumer-electronics in partnership with leading brands (from the 90’s) such as Motorola and Kodak. If ever there was a screaming short in the market, this would be it. Unfortunately, there is likely no borrow - maybe I should slide into Anson Funds’ founder, Moez Kassam’s Instagram DMs…
Yesterday a disgruntled writer put out a long-winded article on Anson, accusing the fund of many nefarious actions, including fraud and market manipulation. Although I disagree with many of the claims, and they do seem to be written by an unintelligent angry teenage boy who was caught holding the bag of Facedrive, one section did stick out to me: the alleged voice recordings of Anson’s Principals discussing their new issue convert strategy:
“Because we’re short a lot of these names, I’ll still buy into a lot of them, right. If I’m already short I’ll buy it (the private placement) to sell to get the warrant. I’d do debt (to equity) with warrants…Every company comes through here, we meet every single marijuana, every single crypto comes through our office. Cos we’re writing the biggest…”
…“we’re making our money on these converts to longs, like converts on the marijuana and I’m short a ton of marijuana and buying a bunch of these broker deals”
…“So you want to go to the places that are lending out, that’s what we do, but it’s very hard for retail. We’re putting up big numbers and paying massive borrow rates. We’re as important to a prime broker as a 10-billion-dollar fund because we’re paying 50, 70, 100 for some of these names and no one pays anything”
Listen, we all knew, and know, what is happening in the new issue market and the entanglement between dealers and institutional buyers, but it is always nice to hear it from the horse’s mouth. In case you missed it, I wrote about MMCAP’s participation in this grey corner of the market.
With all that being said, it is fairly evident that the writer of this “hit” piece (and I use the word “hit” in the loosest way possible, more so referring to it hitting a wall, or hitting a CN/KCS rail at full speed) has it out for the folks at Anson. All I ask is that if you make bold claims, and slander a shop, come correct and be somewhat intelligent on the subject matter.
Lastly, commercial and residential water damage protection hardware/software company Eddy Solutions hit the market with a $15M private placement of units. The company was founded by billionaire Mark Silver who also founded Just Energy Group. Eddy Solutions was originally financed several years ago by a syndicate of retail brokers at Richardson Wealth. Since then, those brokers have moved on to Canaccord Genuity’s wealth platform - which is likely how Canaccord won the mandate.
ECM World
Top 5 Notable Transactions
Eddy Solutions
$15M marketed of Sub Receipts (1 sh)
CG
EV Nickel Inc.
Min. $3M IPO of FT Units (FT Units)
EWP w/ Stifel
GameSquare ESports Inc.
$8.5M bought of Units (1 sh + ½ wt)
CG w/ 8Cap, EWP, Haywood
StorageVault Canada Inc.
$50M bought of Snr. Unsecured Debentures
Scotia w/ CIBC, NBF, TD
Cheers,
GG