Charlotte's Web closes BAT transaction, including $10M private placement
What's the deal? Charlotte's Web Holdings, the Colorado-based CBD and hemp extract company, has closed a two-part transaction with British American TobaccoDealroom has a profile for this one. Try Dealroom → (BAT). BAT converted C$89.6 million (roughly $65 million) in outstanding debt — including principal and accrued interest — into common shares, and made a fresh $10 million equity investment via private placement.
Both the conversion and the new investment were priced at C$0.94 per share. The debt conversion resulted in the issuance of 95.3 million new common shares, while the private placement added another 14.7 million shares.
The original convertible debenture dates back to November 2022, when BAT lent Charlotte's Web C$75.3 million ($54.7 million). That debt, plus $10.3 million in accrued interest, has now been wiped from the balance sheet entirely.
"This transaction meaningfully strengthens our balance sheet and enhances our capital position," said Bill Morachnick, Charlotte's Web chief executive officer.
Why now? Charlotte's Web said the $10 million in fresh cash will support its participation in an anticipated Medicare pilot programme run by the Center for Medicare and Medicaid Innovation (CMMI). The programme would create a pathway for eligible Medicare beneficiaries to access CBD products through their physicians — a potentially significant new distribution channel for the company.
The deal also simplifies Charlotte's Web's capital structure at a time when the broader CBD industry is still seeking regulatory clarity and mainstream legitimacy.
What could go wrong? The transaction massively dilutes existing shareholders, with nearly 110 million new shares issued. BAT's stake in Charlotte's Web grows substantially, raising questions about how much control the tobacco giant will wield over the hemp company's strategy.
The Medicare pilot programme remains subject to regulatory approvals, meaning the key rationale for the fresh investment may not materialise as planned. The deal also still requires final approval from the Toronto Stock Exchange.
The signal: BAT's decision to convert $65 million in debt to equity — rather than seeking repayment — underscores how seriously Big Tobacco is positioning itself in the wellness and CBD space as its core cigarette business faces structural decline. The earmarking of the fresh $10 million specifically for a Medicare pilot programme suggests BAT sees regulated medical distribution, not retail shelves, as the channel that could ultimately legitimise and scale the CBD category.
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