Canopy Growth (CGC 2.41%) stock is seeing another day of big sell-offs Tuesday. The marijuana company's share price was down 8.5% as of 1 p.m. ET, according to data from S&P Global Market Intelligence.
Canopy published a press release before the market opened today announcing that it would be selling new stock. While selling shares in order to raise funds is nothing new for the company, the company announced plans to sell stock at a price that was significantly below its previous market close.
New stock sales trigger bearish momentum
Canopy announced today that it has entered into an agreement to sell stock to some of its existing institutional investors. Through the agreement, the company will wind up selling more than 6.99 million shares at a price of $4.29 per share. With the stock having closed at a price of $5.04 per share the day before the announcement, the new fundraising initiative will sell stock at a level that comes in significantly below where the stock was trading Monday.
Canopy's latest move raises questions
Canopy's new stock-selling move is concerning on multiple levels. For starters, the recent sale announcement indicates that stock will be sold at a roughly 14% discount compared to the level that at which shares ended yesterday's daily trading session. Perhaps even more concerning, the volume of the new stock sale is relatively small.
It's not unusual for unprofitable, growth-dependent companies to sell stock in order to raise funds. It's also not unusual for companies in this category to sell large amounts of stock to institutional investors at a discount. But Canopy's new stock sale is expected to raise approximately $30 million in proceeds -- a level that looks relatively small in the context of the company's roughly $385 million market cap.
With Canopy selling a large amount of stock at a significant discount to recent pricing level, it's not surprising investors are disappointed with the move.
