Cannasouth rights offer
Cannasouth Limited (CBD) has announced a 1-for-9.53075 rights offer. Learn more about the offer and how to take part through Sharesies.
Offer summary
$0.29 NZDOffer price per share.
24 May ’23Last day to take part in the offer.
1-for-9.53075Get the right to buy 1 new CBD share at the offer price for every 9.53075 you already own.
Cannasouth Limited (Cannasouth) (CBD) has proposed to merge with another medical cannabis company called Eqalis, and is aiming to raise up to approximately $9 million NZD through this rights offer.
Cannasouth plans to use the money towards:
Funding the ongoing working capital requirements of Cannasouth post Completion including:
building and expanding Cannasouth’s international sales team
funding merger implementation costs.
Funding existing Cannasouth projects including GMP certification of Cannasouth Cultivation’s grow facility, product certification for customer in a key export market.
Funding existing Eqalis projects including ICE-X, Z-Grow, T-Clone, A-Script, Project Formulation, and new active pharmaceutical ingredients.
Funding the expansion of RestoreMe Clinic.
Validation and commercialisation of next generation drug delivery systems.
Clinical trials.
The merger is conditional upon CBD raising not less than $7 million of new capital on or before 9 June 2023. In the event that this condition is not met, then the Merger and the Capital raise won’t proceed and any money from applications made in the rights offer will be refunded.
Cannasouth announced on 10 May 2023 that it has received $5.1 million of firm commitments for the capital raise.
To learn more, check out:
A rights offer is one way that a company raises capital (cash). It gives existing shareholders the opportunity to buy more shares in the company—usually at a discounted price and in proportion to the number of shares they already own.
Existing shareholders receive ‘rights’ that they can use to buy shares through the offer. To do this, rights need to be ‘exercised’ which involves paying the offer price for every right they want to turn into a new share.
To learn more, read our article on rights offers.
Who received rights?
If you held Cannasouth shares at market close on Monday 8 May 2023 through Sharesies, rights will have been allocated to your Portfolio on Wednesday 31 May 2023 as ‘Cannasouth Rights’.
You’ll have received 1 right for every 9.53075 Cannasouth shares you held. Each right gives you the opportunity to buy 1 new Cannasouth share at the offer price of $0.29 NZD per share.
If you held a fractional amount of Cannasouth shares, you’ll have been allocated a proportional amount of rights.
Cannasouth will issue investors 1 option for every 2 shares that they buy through this rights offer.
Each option gives you the right to purchase 1 Cannasouth share for $0.29 NZD before the expiry date of Sunday 31 May 2026.
Any Cannasouth shares bought after Monday 8 May 2023 through Sharesies are not eligible to receive rights.
Can I take part?
Whether or not you already hold Cannasouth shares, you may be able to take part in the offer.
If you were allocated rights through Sharesies, you’re able to:
exercise some or all of your rights to buy shares at the offer price
do nothing with some or all of your rights
apply to buy more shares through the shortfall.
Rights are not listed or tradeable on the NZX, so you won’t be able to sell your rights to someone else through Sharesies.
To take part, you need to be an existing shareholder and have a registered address in New Zealand or Australia. You can’t take part if you’re based outside of New Zealand or Australia, or you’re acting on behalf of a person based outside New Zealand or Australia.
To view your rights, go to your Portfolio.
If you weren’t allocated rights through Sharesies, you can apply to buy shares at the offer price through the shortfall.
As a new investor in Cannasouth through Sharesies, you’ll need to have a registered address in New Zealand to take part in the shortfall. You can’t take part if you’re based outside of New Zealand, or you’re acting on behalf of a person based outside New Zealand.
To learn more, check out the ‘Apply for shortfall’ section below.
How to take part
Each right gives you the opportunity to buy 1 new Cannasouth share at the offer price of $0.29 NZD.
If you wish to take up the offer, you’ll need to apply to exercise rights you hold. That means paying the offer price of $0.29 NZD for every right you want to turn into 1 new Cannasouth share.
Exercise some (or all) of your rights
To exercise some or all of your rights, go to ‘Cannasouth Rights’ in your Portfolio, and select Exercise.
You’ll need enough money in your Wallet at the time that you exercise to pay the offer price per share. If you need to convert currency to pay the offer price, you’ll also need to pay a currency exchange fee.
If you exercise your rights, Cannasouth is expected to allocate the shares you’re buying on Wednesday 31 May 2023.
Note: The price you pay for new shares in the offer may be higher or lower than the price that shares are trading at on the NZX.
Apply for more shares in the shortfall
If you’ve exercised all of your rights, you can choose to apply for more shares in the shortfall.
The shortfall is an opportunity to apply to buy shares that aren’t taken up by other investors in the rights offer.
To learn more, check out the ‘Apply for shortfall’ section below.
Unexercised rights
Any rights that you haven’t exercised by 3 PM Wednesday 24 May 2023 will expire and be removed from your Portfolio once the offer is completed.
If this happens you will not receive any value for them and your existing Cannasouth shareholding will be diluted (meaning each share you hold will represent a smaller proportion of ownership in the company than before the offer). The shares the rights would’ve entitled you to will become available for other investors to buy in the shortfall.
Exercise period on Sharesies
Wednesday 10 May 2023 to 3 PM Wednesday 24 May 2023
Fees
You won’t be charged the Sharesies transaction fee to exercise rights, but you will be charged currency exchange fees if you convert any money to NZD in order to participate.
When a company raises capital through a rights offer and its existing shareholders don’t exercise all of their rights into new shares, the company might run a shortfall so that any leftover shares can be bought by other investors.
Through Cannasouth's shortfall, investors can apply to buy Cannasouth shares at a set price of $0.29 NZD per share.
Cannasouth will issue investors 1 option for every 2 shares that they buy through this rights offer.
Each option gives you the right to purchase 1 Cannasouth share for $0.29 NZD before the expiry date of Sunday 31 May 2026.
Applying for the shortfall
To apply, go to ‘Cannasouth’ in Sharesies, select Buy > Apply for shortfall.
Your application will be for Cannasouth shares, which are listed on the NZX. You’ll make your application in NZD, and you’ll need to have enough money in your Wallet at the time of your application.
You’ll need to give the maximum amount of money you’d like to invest through the shortfall.
If there’s more interest than there are shares available, you might also be scaled. This means you may receive fewer or none of the shares that you apply for.
If your application is successful, Cannasouth is expected to allocate the new shares on Wednesday 31 May 2023.
Shortfall period on Sharesies
Wednesday 10 May 2023 to 3 PM Wednesday 24 May 2023.
Fees
You won’t be charged the Sharesies transaction fee to apply for the shortfall, but you will be charged currency exchange fees if you convert any money to NZD in order to participate.
Options can be exercised at the set price of $0.29 NZD per share to buy CBD shares.
You’ll be able to apply to exercise your options at any time through Sharesies until Sunday 31 May 2026. Sharesies will settle requests to exercise options with Cannasouth every quarter until Sunday 31 May 2026 (at the end of February, May, August, and November each year).
If you exercise your options, Cannasouth will issue the shares you’re buying on the last business day of the quarter in which the options were exercised.
The first period that Cannasouth will issue new shares from exercised options will be the period ending February 2024.
Do nothing
You can choose to do nothing with the options. The options will expire and be removed from your Portfolio after Sunday 31 May 2026, and you won’t receive any value for them.
Key dates
Event | Date |
|---|---|
Record date for the offer | 5 PM Tuesday 9 May 2023 |
Rights appear in Sharesies Portfolios | Wednesday 10 May 2023 |
Rights exercise period opens | Wednesday 10 May 2023 |
Applications for shortfall open through Sharesies | Wednesday 10 May 2023 |
Applications for exercising rights closes through Sharesies | 3 PM Wednesday 24 May 2023 |
Applications for shortfall close through Sharesies | 3 PM Wednesday 24 May 2023 |
Cannasouth expected to allocate new shares | Wednesday 31 May 2023 |
New shares expected to start trading on the NZX | Thursday 1 June 2023 |
Before taking part
All investing involves risk—you aren’t guaranteed to make money, and you might lose the money you start with.
We encourage you to do your due diligence, consider the risks involved, and speak to a licensed financial advice provider if you need help deciding whether to take part.
For some things to consider before taking part, check out the FMA’s guide to taking part in a rights issue.
