Why did this ASX cannabis share burn 10% today?

Creso Pharma has announced a capital raise. Here are the details.

| More on:
Man in a cannabis greenhouse looks unhappy and puts his thumb down.

Image source: Getty Images

Key points

  • Shares in ASX-listed cannabis company Creso Pharma are plummeting today on news of a capital raise
  • The company is raising $5 million through a placement
  • The raised funds will go towards its expansion into the United States, as well as other ventures

The Creso Pharma Ltd (ASX: CPH) share price was far from green on Friday after the ASX cannabis company broke a multi-day trading halt with news of a capital raise.

Creso Pharma is raising $5 million through a placement wherein it will offer new shares for 6.9 cents apiece.

At the close of trading, the Creso Pharma share price was 6.9 cents, having tumbled 10.39%.

Let’s take a look at what the ASX cannabis share plans to do with its raised cash.

What sent this ASX cannabis share plummeting?

ASX cannabis company Creso Pharma’s share price is falling after the company announced a placement to raise $5 million to help fund its expansion into the United States.

As part of the placement, involved investors will receive 1 free option for every share they purchase.

On top of that, the placement’s broker, EverBlu Capital, will also receive an option for every free option handed out.

The options will be exercisable at a price of 14 cents each on or before the 18-month anniversary of their issuing.

Creso Pharma non-executive director Adam Blumenthal has committed to purchasing around $318,250 worth of new shares as part of the placement. Blumenthal’s participation is subject to shareholder approval at a future general meeting.

The $5 million will be put towards the company’s expansion into the United States after it acquires Sierra Sage Herbs and Green Goo brand.

The cannabis company announced its acquisition to the ASX earlier this month, causing its share price to surge 5.8%.

Some of the funds raised through the placement will go towards product development and general working capital.

Speaking on the capital raise, Creso Pharma CEO and managing director, William Lay commented:

These funds will provide us with additional financial flexibility to advance our US-focused growth trajectory, progress a number of new product development initiatives, and explore new opportunities to unlock shareholder value.

The company remains very well positioned to capitalise on the global market for recreational cannabis, CBD products, and psychedelic treatments. We have a number of growth initiatives underway and look forward to providing additional updates as these materialise.

Creso Pharma share price snapshot

This year so far has been rough on the Creso Pharma share price.

It has fallen 15% since the start of the year. It’s also 60% lower than it was this time last year.

Motley Fool contributor Brooke Cooper 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.

More on Cannabis Shares

A woman wearing a pink blouse and straw hat holds up a cannabis leaf with tall green cannabis plants in the background
Cannabis Shares

Remember when ASX cannabis shares were smoking hot? Where are they now?

Newly legalised recreational and medicinal marijuana markets aren't getting the media hype they once did.

Read more »

A flaming orange arrow against a black background demonstrates the rising Pilbara Minerals share price today
Cannabis Shares

Why did the Little Green Pharma share price flame 23% higher today?

Little Green Pharma shares were on fire on Thursday...

Read more »

Rising marijuana share price.
Cannabis Shares

Here’s why the Incannex share price is rocketing 18% today

Incannex provided an update on the APIRx takeover.

Read more »

Young adult male farmer standing smiling in his indoor greenhouse full of herbal cannabis plants at a cannabis cultivation facility
Cannabis Shares

How have ASX cannabis shares been performing so far in 2022?

The sector has held its own during volatile times.

Read more »

Female doctor with a mask holds out hand in a stop gesture.
Healthcare Shares

Here’s why the Incannex (ASX:IHL) share price is on ice today

The company's shares are in a trading halt...

Read more »

two men in formal business clothing closely inspect a bud from a cannabis crop.
Cannabis Shares

Down 35% in a month, why there’s good news for the Creso Pharma (ASX:CPH) share price today

Cannabis derived CBD is being used to treat a growing list of ailments.

Read more »

A Cronos Australia farmer and ASX cannabis shares investor stands in a field of cannabis plants and smiles at the camera
Cannabis Shares

This little-known ASX cannabis share has quietly gained 26% in a month to trade at all-time highs

Why is this ASX cannabis share having such a stellar month?

Read more »

a man sits on his sofa loong at his phone and raises a fist to the air in happy celebration.
Healthcare Shares

The Creso Pharma (ASX:CPH) share price jumped 6% today. Here’s why

Investors responded well to the healthcare company's step forward today...

Read more »