COMPASS’ Securities Purchase Agreement Is Big News

It’s still cannabis earnings season, but we’re also turning to look at some of the news from the psychedelics industry. This Trade To Black Podcast, Shadd Dales, Anthony Varrell, and Benjamin A. Smith take a more granular look at Cresco Labs, Columbia Care, and the news about COMPASS Pathways’ security purchase agreement.

Cresco Labs (CSE:CL) (OTCQX:CRLBF) released their Q2 2023 results earlier this week, and their figures are pretty impressive. A Q2 revenue of $198m, up 2% sequentially, driven by retail growth of 4% and flat wholesale revenue. A gross profit of $87m, adjusted gross profit of $93m, and adjusted gross margin of 47% is just a few of the highlights. This report both met analysts’ expectations and showed significant improvement compared to the previous quarter. Adjusted EBITA stock rose to $40.9m, up from $9m in Q1.

These numbers are pretty good for Cresco, especially considering the dip that happened right before earnings as Cresco and Columbia announced the termination of their $2bn merger. Columbia Care itself had also a relatively solid Q2. Revenues fell slightly to $129m, but it was an improvement over the previous quarter, and it beat some estimates.

The biggest news, however, was COMPASS Pathways (NASDAQ: CMPS). COMPASS made the significant announcement that it was entering into a securities purchase agreement with a team of esteemed healthcare specialist investors. It’s anticipated that this could secure most – if not all – of the funding Compass would need to conduct their ongoing Phase 3 psilocybin-assisted clinical therapy trial.

The agreement entails the issuance of 16,076,750 American Depositary Shares and equivalent number of purchase warrants. The price is approximately $7.78 per ADS with a purchase warrant entitling the purchase of single ADS. Each warrant is exercisable at $9.93 per. The closure would mean a gross inflow of approximately $125m directly to COMPASS prior to subtraction of agent commissions and expenses with an additional $160m in capital possible if the warrants are fully exercised.

We share our thoughts on these announcements, plus how they’re resonating in the industry.

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