Aurora Cannabis Inc. (ACB) has made a $20 million investment in the emerging adult-use cannabis company Choom Holdings Inc. (OTCQB: CHOOF). The conversion price is approximately C$1.25 per share. Aurora has also secured the ability to purchase up to 40% of the company at a price of C$2.75 a share.
The Choom brand is inspired by Hawaii’s “Choom Gang”—a group of buddies in Honolulu during the 1970’s who loved to smoke cannabis—or as the locals call it, “Choom”. The company strives to capture the spirit of the original Choom Gang for Canadians with the with the motto ‘Good Times with Good Friends’.
In addition to the investment in the company’s cannabis products, Choom is also developing a chain of retail stores with a “strong focus on elevated customer experiences.” In a company statement, Choom said it has the rights to open 45 retail stores across Western Canada, granted these stores are subject to local approvals. So far, 45 applications have been submitted, along with 27 development permits and 18 building permits received from various towns.
“Choom has developed a strong brand identity that radiates throughout its developing network of retail stores, which is well aligned with Aurora’s overall adult usage strategy,” said Terry Booth, CEO of Aurora. “Through this strategic investment, Aurora further diversifies its retail strategy, with additional retail opportunities across Western Canada, and future potential opportunities in the Ontario market.”
Chris Bogart, President & CEO of Choom, added, “This is a transformational investment from Aurora, one of the world’s leading cannabis companies, that helps accelerate our growth and expand our retail footprint to be one of best positioned and largest retailers in the country. Aurora’s continued confidence and investment allow Choom to provide high-quality cannabis to a broader market of consumers across the entire country and expedite our expansion and the rollout of store openings.”
Terms Of The Deal
The Offering is an unsecured convertible debenture maturing in four years, convertible into Common Shares: (i) at the option of Aurora, any time prior to the Maturity Date at a conversion price of $1.25 per Common Share, subject to a minimum conversion amount of $5,000,000, and (ii) at the option of Choom any time after the hold period has expired and the volume weighted average trading price of the Common Shares on the Canadian Securities Exchange is $3.00 or more for a period of 10 consecutive trading days.
In connection with the Offering, Choom also issued to Aurora, for no additional consideration, 95,760,367 Common Share purchase warrants at an exercise price of $2.75, subject to adjustments in accordance with the terms thereof, to allow Aurora to increase its pro rata equity interest in Choom to approximately 40%. The Warrants are exercisable by Aurora at any time prior to 5:00 p.m. Vancouver time on November 02, 2020.
Aurora Cannabis Expansion Continues
Aurora recently listed its shares on the New York Stock Exchange joining Canopy Growth (CGC). This following a rapid-fire buying binge that now numbers 15 wholly owned subsidiary companies including MedReleaf, CanvasRX, Peloton Pharmaceutical, Aurora Deutschland, H2 Biopharma, Urban Cultivator, BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia Labs, HotHouse Consulting, MED Colombia, Agropro, Borela, and the pending acquisition of South America company ICC.
The company also took some profits of its own with regards to its holdings in The Green Organic Dutchman (TGOD). Aurora owned over 39 million shares of TGOD. Between October 10 to October 16, 2018, Aurora sold roughly 5,783,200 shares for approximately $32,867,131 at a price of $5.68 per share, representing 2.2% of the issued and outstanding Shares of TGOD.