High Times Cuts $28.6 Million of Debt with Equity Conversion, Reaches $13.2 Million Milestone in IPO

Hightimes Holding Corp Extends IPO Deadline to January 31, 2019

By John Jannarone

The parent of High Times magazine has reduced $28.6 million of existing debt through a conversion and warrant exercise, trimming its overall debt burden by more-than half, the company said Tuesday.

The company also said it has raised $13.2 million from over 15,000 investors and extended the offer period until the end of January.

“This transaction enables us to simplify our balance sheet and further our business development efforts,” said Chief Executive Officer Adam Levin. “We are pleased to have the support of some of our largest shareholders as we take this next step in the maturation of our company. The confidence and support of our shareholders will help us to execute on our vision of becoming a dominant player in the cannabis industry.”

Those converting their debt to equity immediately include holders of $25.6 million of convertible 12% notes, who will receive shares of common stock at $11 per share (the same per share price as the shares in the IPO). Also, a senior secured lender has agreed to exercise its warrants and reduce another $3 million of debt.

The news comes as Hightimes Holding Corp is raising up to $50 million in a Regulation A+ IPO open to all investors.  The complete offering details are available at the company’s investing portal here. The company, which also operates the well-known Cannabis Cup events, plans to use the IPO proceeds to invest in growth across both existing and new business platforms.

For instance, until current management took over, the company had neglected to pursue a serious digital strategy. The company’s plans include the recent launch of an over-the-top streaming service that’s akin to a Netflix of cannabis, reflecting a fresh push to monetize the High Times brand – the strongest in the marijuana industry.

And in September, the company announced it had purchased regional cannabis publication DOPE Media for $11.2 million. Regional publications are valuable in the industry because laws around marijuana vary state-by-state while it remains federally illegal.

Investment bankers say IPO subscriptions under Regulation A+ tend to accelerate just before reaching the end of their offer periods, indicating the total raised may ultimately be significantly more.

The cannabis industry has drawn attention from investors and blue-chip companies in recent months as legalization in more U.S. states creates growth opportunities. Beer company Constellation Brands recently increased its stake in Canopy Growth with a $3.8 billion investment in the Canadian cannabis grower, a deal that surprised investors.

Once public, High Times will join other listed, growth-stage companies focused on the burgeoning cannabis industry. Those include MassRoots, which operates a mobile app for marijuana consumers to share and compare reviews. Another is KushCo Holdings, which offers products to marijuana dispensaries and growers. Most recently, Level Brands agreed this week to purchase CBD manufacturer cbdMD ahead of legislation expected to make hemp treated like a traditional crop, clearing a path for broader CBD sales.

IPO Edge recently published a detailed financial analysis of the High Times IPO. One key to the company’s potential is its strong brand name, which is known even among those who don’t currently consume marijuana.

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