The Elixinol Global Ltd (ASX: EXL) share price tumbled after management issued an update to its share purchase plan (SPP) today.
The EXL share price lost 7.6% to 24 cents in after lunch trade when the S&P/ASX 200 Index (Index:^AXJO) gained 0.5%.
Other ASX medicinal cannabis stocks are faring better. The Creso Pharma Ltd (ASX: CPH) share price gained 10.3% to 11 cents and the Auscann Group Holdings Ltd (ASX: AC8) share price stayed flat at 17 cents at the time of writing.
Elixinol share price well above offer price
But Elixinol shareholders may not be too perturbed as the stock is still up 33% since the company emerged from a trading halt.
The trading halt was called as management undertook an $8.2 million placement and launched a SPP to raise another $2 million.
Management said today that its SPP has secured $1.3 million ahead of the 11 December closing date for the SPP.
Unusual SPP update
It's quite unusual for management to issue an update to the SPP, but I take it that management is very eager to get the cash.
This was evident as the ASX statement "strongly encourages" shareholders who haven't put in their applications to do so before next week's deadline.
The fact is, there is no incentive for shareholders to lock in bids for the raise so far out from the SPP closing date.
Why it's better to wait
Between now and then, the Elixinol share price could drop below the offer price of 17 cents a share. If that were to happen, it would be cheaper for shareholders to purchase shares on market instead.
If management really wanted shareholders to consider applying to the SPP earlier instead of later, it would have offered a discount to the five-day volume weighed average price (VWAP).
This means SPP applicants will either pay 17 cents or the small discount to the VWAP, whichever is lower.
Foolish takeaway
The update also worked against the company, in my view. Shareholders now know they are likely to get their full allocation.
If they thought that there is a good chance they will be scaled back (meaning they only get part of what they applied for), shareholders may be tempted to apply for more than what they really wanted.
Of course, there could be a late surge in applications as there normally is to such programs, but today's update puts the oversubscription theory in doubt.
Sometimes more is less.
