Morning Commentary: Tilray Brands prices convertible notes toward cheap end of talk

Chicago, May 26 – Tilray Brands, Inc. brought a late-evening convertible bond deal to the party on Thursday, springing on investors a $150 million offering after 4 p.m. ET.

The Securities and Exchange Commission-registered transaction was announced as priced less than eight hours later.

The devil may be in the details on this transaction, with an additional 38.5 million shares in play in a concurrent offering that will be subject to stock lending arrangements with an affiliate of Jefferies LLC s to help facilitate hedging activity.

The company is receiving a nominal $3,850 for the new shares.

In Friday morning trade, the company’s stock was down an impressive 21% on the week, moving at around $1.90 per share, with an abrupt drop after the double-deal (the notes and the shares) was announced.

The borrowed shares are newly-issued shares issued in connection with the bond transaction and will be canceled or held as treasury shares by Tilray upon the expiration or the early termination of the share lending arrangements, according to an FWP filing with the SEC about the arrangement.

A market source put a hard pass on the bond deal, based on the details.

On the bonds, the 5.2% coupon puts the deal in something of rarified air in the 2023 market.

Only seven of the 38 tranches on the board for the year have gone above 4%.

The 12.5% conversion premium is similarly, but even more exaggeratedly, scraping the bottom – 12.5% is as low as it goes in the last five-plus months.

Initial price talk for the notes had called for a coupon of 5% to 5.25% and a fixed initial conversion premium of 12.5%, according to a market source.

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