The crash is on in KushCo Holdings Inc (OTCMKTS:KSHB) by all accounts. Shares have been in waterfall decline mode over the last few weeks, and particularly over the past 48 hours. We now know the catalyst is a major offering as the company begins to appears potentially insolvent following threats to ban Vaping across the US market.
To wit: The company just announced it has entered into definitive agreements with investors for the purchase and sale of 17,197,570 units, with each unit consisting of one share of common stock, par value $0.001 per share, and a warrant to purchase half a share of common stock, at an offering price of $1.75 per unit, pursuant to a registered direct offering. Note, this funding grab follows a $50 million credit line last month, suggesting that the company is quickly burning cash.
KushCo Holdings Inc (OTCMKTS:KSHB) is the parent company to a diverse group of business units that are transformative leaders in the cannabis, CBD and other related industries. KushCo Holdings’ subsidiaries and brands provide exceptional customer service, product quality, compliance knowledge and a local presence in serving its diverse customer base.
KushCo Holdings’ brands include Kush Bottles, a dynamic sales platform that is the nation’s largest and most respected distributor of packaging, supplies, and accessories, Kush Energy, which provides ultra-pure hydrocarbon gases and solvents to the cannabis and CBD sector, Hybrid Creative, a premier creative design agency for cannabis and non-cannabis ventures, and Koleto Packaging Solutions, the research and development arm driving intellectual property development and acquisitions.
Founded in 2010, KushCo Holdings has now sold more than 1 billion units and regularly services more than 5,000 legally operated medical and adult-use dispensaries, growers, and producers across North America, South America, and Europe. KushCo Holdings subsidiaries maintain facilities in the five largest U.S. cannabis markets as well as having a local sales presence in every major U.S. cannabis market.
According to its materials, “KushCo Holdings, strives to be the industry leader for responsible and compliant products and services in the legal cannabis and CBD industry. The Company has been featured in media nationwide, including CNBC, Los Angeles Times, TheStreet.com, Entrepreneur, and business magazine Inc. While KushCo Holdings services all facets of the cannabis and CBD industries, it has no direct involvement with the cannabis plant or any products that contain THC or CBD.”
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As noted above, KSHB just announced a new and dramatic direct offering of shares. In other words, the company needs money asap and can’t find a non-toxic way to raise it.
The stock has suffered a bit of late, with shares of KSHB taking a hit in recent action, down about -43% over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -53%. Furthermore, the name has witnessed a pop in interest, as transaction volume levels have recently pushed a bit over 350% above the average volume levels in play in this stock over the longer term.
According to the release, “The warrants will have an exercise price of $2.25 per share, will be immediately exercisable and will expire five years from the date of issuance. The gross proceeds of the offering will be approximately $30.1 million before deducting placement agent fees and other estimated offering expenses. The Company intends to use the net proceeds for working capital and for other general corporate purposes. The closing of the registered direct offering is expected to take place on or about September 30, 2019, subject to the satisfaction of customary closing conditions.”
Earning a current market cap value of $154M, KSHB has a significant war chest ($12.2M) of cash on the books, which must be weighed relative to about $29.8M in total current liabilities. One should also note that debt has been growing over recent quarters. KSHB is pulling in trailing 12-month revenues of $121.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 221.5%. This is an exciting story, and we look forward to a follow-up chapter as events transpire. Sign-up for continuing coverage on shares of $KSHB stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $KSHB, either long or short, and we have not been compensated for this article.