Cann (ASX:CAN) share price crashes 14% after announcing another capital raising

This cannabis company will soon have raised more money than its market capitalisation…

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The Cann Group Ltd (ASX: CAN) share price is crashing lower on Monday morning. This follows the announcement of yet another capital raising by the cannabis company.

At the time of writing, the Cann share price is down 14% to 32.5 cents.

What did Cann announce?

This morning Cann announced an institutional placement and a share purchase plan aiming to raise a total of $20 million.

This comprises a $10 million institutional placement and a $10 million share purchase plan, with the funds being raised at 27.5 cents per new share. This represents a 27.6% discount to the Cann share price prior to its trading halt.

According to the release, the proceeds from the capital raising will be used to invest in initiatives which are expected to deliver substantial cost savings as Cann moves to large scale production with the commissioning of its new manufacturing facility near Mildura.

Furthermore, the funding will be used to expedite and strengthen Cann’s in-house extraction, laboratory and manufacturing capabilities. This is expected to de-risk the company’s supply chain and lower costs by reducing its reliance on third party manufacturers and service providers.

How many capital raisings?

Should the company complete this capital raising successfully, it will mean it has raised $138.2 million from investors since listing.

This comprises a $78 million capital raising in 2017 at $2.50 per new share, a $40.2 million capital raising in August 2020 at 40 cents per new share, and now $20 million at 27.5 cents per new share.

And despite raising $138.2 million from investors, the company’s market capitalisation is just $105.6 million (prior to today’s movements).

Clearly, the funds raised have not created value for shareholders. In fact, if you invested $10,000 in the 2017 capital raising, your investment would be worth just $1,520 today. So rather than creating value, Cann shareholders have seen significant wealth go up in smoke.

The Cann share price is down 46% in 2021.

Should you invest $1,000 in Cann right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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