This week, OrganiGram Holdings Inc. (OGI) announced it had established an At-The-Market equity program allowing the company to issue up to C$55,000,000 of common shares from its treasury to the public (on occasion, at the company’s discretion).
Shares sold via the ATM Program will be sold through the NASDAQ, the Toronto Stock Exchange (the “TSX”), and any other market where Common Shares are listed, quoted or traded, at the market price during the time of transaction.
Organigram will determine the volume and timing of distributions under the ATM Program – if any. The company plans to use any net proceeds from the ATM Program to finance capital projects, for general corporate purposes, and to pay down debts.
OGI’s ATM Program will either be in effect until December 25, 2021, or until all Common Shares are issued and sold pursuant to the ATM Program (unless terminated sooner by OrganiGram Holdings Inc. or its agents. The “agents” are collectively referred to as Canadian agent BMO Nesbitt Burns Inc., and U.S. agent BMO Capital Markets Corp.
Could the ATM program be in response to a lukewarm earnings report?
Just last week OGI released its Q4 and fiscal year-end report — and the results were less than stellar.
The company posted a bottom-line loss in the last quarter totaling C$22.5 million. The consensus estimate had pointed to a loss of 1 cent per share, which became a concern as it followed a profit of C$18.2 million (or 12 cents per share), when compared to the year-over-year quarter.
In response to the company’s disappointing performance, OGI executives partly pointed to a lackluster retail network and slower-than-expected store openings throughout Ontario.
“Quarter to quarter revenue is expected to continue to be volatile due to the timing of large pipeline orders for Ontario, in particular, where there is a centralized distribution model and where store additions are difficult to forecast,” the company said in a statement.
Nonetheless, a lot of investors have maintained their bullishness on this stock. OrganiGram is renowned for its operational efficiencies, operating out of a single facility located in New Brunswick, making it more efficient than some of its peers.
The company has placed a significant focus on producing premium-grade marijuana, versus racing to open giant new facilities across the globe. Additionally, OGI has received licensing approval for 17 new grow rooms, which should increase production capacity to 76,000 kilograms per year.
Corey Hammill, a Paradigm analyst, believes that this positions the company to win. He also thinks that OrganiGram will benefit from Cannabis 2.0 (when edibles and derivatives become legal for recreational use in Canada). Thus, he doubled down his “buy” rating and $3.95 price target.
According to a consensus breakdown, six buys and three holds add up to a “moderate buy.” The $6 average price target indicates upside potential of 136%.
During its most recent earnings call, OrganiGram stated that it expects to generate a higher net revenue in the upcoming Q1 than it did in the previous Q4, based on increased sales to provinces and higher wholesale revenue.
The company also highlighted the 70% completion of its Moncton Campus facility expansion, during the previous quarter.
OGI shares were trading at $2.59 per share on Friday afternoon, down $0.03 (-1.15%). Year-to-date, OGI has declined -27.41%, versus a 27.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Eric Bowler
Eric is an accomplished journalist providing in-depth insights for more than two decades, with a special focus on the cannabis industry. Learn more about Eric’s background, along with links to his most recent articles. More...