Our last look at The Supreme Cannabis Company ($FIRE) was back in May, and GoBlue detailed the margin and EBITDA hurdles of them at the time.

While he noted the ‘ice on the wings’ of interest costs and flat sales, I saw a company paying people with paper and swallowing a large spoonful or write-downs to clear the deck for a brand new CPG(!) driven CEO.

That new CEO approached debt-holders, apparently making the ‘requisite majority’ an offer they couldn’t refuse:

• Total principal of Oct 2021 debentures reduced by $63.5MM in exchange for shares
• Interest rate hiked to 11% (from 6%), tenor extended by 2 years to 2023
• Interest to be paid in another debenture that will accumulate accretion, to be paid in cash
• Price reset to $0.285 from $2.45, reducing annual interest by $3.1MM (from $6MM to $2.9MM)

Pretty straight-forward: dilution to preserve cash flow. Total shares before this? 354MM. After? 470MM. The debenture holders can do what they want with half of the new shares immediately, the other half become available to trade in 4 months (liquidity was apparently valued highly by debt-holders).

Their at-the-money program has been up and running for awhile as well, we’ll see how the efforts on at front have gone as well.

It’s good to see there’s some sort of flexibility available to these outfits, but it’s coming at the expense of existing shareholders….and of debt-holders taking positions unaligned with expectation. SEDAR hasn’t been updated as of writing. $FIRE’s gotten the ride all shined up, taken out the rust, installed a CPG stereo system, and now has another bit of runway to see if it can get up to speed.

I’m watching this one because if $FIRE – with their brand and learning curve and facilities in place – can make a go of it, it’ll be a good sign. If they have problems with channel penetration and 2.0 entry/uptake…..

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $FIRE