TORONTO - Organigram Holdings Inc. (NASDAQ:OGI) (TSX:OGI), a Canadian producer of cannabis and cannabis-derived products, announced a strategic US $2 million investment into North Carolina-based Open Book Extracts (OBX), a manufacturer specializing in hemp-derived ingredients and products.
This move marks Organigram's first investment from its Jupiter pool, which is part of a broader strategy to expand its footprint in the U.S. market.
The investment, made through a convertible note, aligns with Organigram's ambitions to explore the U.S. market and consumer preferences, potentially paving the way for future product launches in the country. As part of the agreement, Organigram will gain an observer seat on the OBX board.
OBX, located in Roxboro within North Carolina's Research Triangle, is in the process of completing its EU GMP certification, which could lead to increased international collaboration opportunities with Organigram. OBX's current investors include a fund managed by KEY Investment Partners and the Lago Innovation Fund, as well as BT DE Investments Inc., a subsidiary of British American Tobacco (NYSE:BTI) plc. (BAT (LON:BATS)).
The note, which matures on October 16, 2026, is part of a larger funding round totaling approximately US $15 million. It is secured by a general security charge over OBX's assets and is subordinate only to one security holder. Subject to certain conditions, the note will convert into equity at a 20% discount to the price of a future equity raise of at least US $5 million by OBX.
Organigram's Chief Strategy Officer, Paolo De Luca, expressed excitement about the investment in OBX, citing the company's scalable platform, differentiated products, and significant U.S. market access. OBX's co-founder and CEO, David Neundorfer, and co-founder, President, and CFO, Oscar Hackett, welcomed the investment, noting the shared commitment to high product quality standards.
The funds from the investment are earmarked for general corporate purposes, as both companies look forward to potential collaboration in research, technology development, and formulation sciences.
This development is based on a press release statement and comes as Organigram continues to focus on high-quality cannabis production for both medical and adult recreational use, as well as on establishing international business partnerships to extend its global reach.
InvestingPro Insights
Organigram Holdings Inc. (NASDAQ:OGI) has recently taken a strategic step into the U.S. market with its investment in Open Book Extracts. While this move indicates a forward-thinking approach to expansion and product diversification, it's essential to consider the company's financial health and market performance for a comprehensive understanding.
InvestingPro data reveals that Organigram has a market capitalization of $258.41 million, which is a valuable indicator of the company's size and a factor to consider when assessing its market reach and potential growth.
Despite a challenging profitability outlook, as the company's gross profit margin for the last twelve months as of Q4 2023 stood at 23.51%, it is notable that the company has seen significant returns with a 1-month price total return of 23.53% and a 3-month price total return of 82.61%.
An InvestingPro Tip to consider is that Organigram is quickly burning through cash, which could impact its ability to sustain long-term growth and investment strategies such as the one made into OBX. Additionally, analysts have revised their earnings downwards for the upcoming period, suggesting that investors should keep a close eye on the company's forthcoming financial results.
For those interested in deeper analysis and more InvestingPro Tips, there are 11 additional tips available on InvestingPro, which can be accessed by visiting https://www.investing.com/pro/OGI. To enhance your experience, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This insight can provide valuable context for investors considering Organigram's recent investment decision and its potential impact on the company's U.S. market aspirations.
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