In just two weeks, The Very Good Food Company (Canada: VERY.CN, US: VRYYF, Europe: 0SI) announced a $10M bought deal financing, became massively oversubscribed, upsized the deal, and closed the financing. This rate of change would be shocking for most other companies but, if we’ve seen anything from Very thus far, it’s that they know how to move quickly.
Find details of the deal below!
The Very Good Food Co. raised a total of $13,226,150 through this upsized, oversubscribed financing, utilizing shares and half-warrants, which each composed one “Unit”. That sentence may seem overwhelming, so let’s look at each component individually.
Oversubscribed financing: The term “oversubscribed” is used when demand outweighs supply; specifically, when investor demand for the financing outweighs share supply. For example, if a company is only willing to issue 1,000 shares but total investors want to purchase 1,500 shares, the financing is considered oversubscribed.
Upsized financing: This is a deal that becomes larger than it was initially intended to be, typically because it is oversubscribed. To extend the previous example, if the company sees the excess demand and is willing to issue 1,500 shares to satisfy investors, they will “upsize” the deal.
Warrants: These represent a potential source of capital in the future when the company needs to raise additional capital without completing another financing. They are essentially a ‘ticket’ to purchase stock at a given price (which is typically higher than the share price at the time of offering) to make the deal more attractive for risk-averse investors.
Units: The financing is said to be composed of “units” made up of one share and one half-warrant. This means that, for every “unit” purchased, investors receive one share in the company, as well as the option to purchase one half of one share at a later date, at a given price. If an investor has purchased 100 “units” in this financing, they pay $3.50/share for 100 shares and can purchase another 50 shares at $4.50/share at any point in the next 18 months.
The immediate result of this financing is an additional $13.2M on Very’s balance sheet, with 3,778,900 new shares issued and available on the open market. CEO, Mitchell Scott, stated that proceeds are mainly to be used to fund the commencement of operations at the Vancouver “Rupert” facility, expected to come online in Q1 of 2021.
The Rupert facility is estimated to be able to produce 37M lbs. of product per year at its full capacity, compared to the current 1.375M coming out of the Victoria facility. Having the necessary capital to properly execute on this will allow the company to continue expanding at a rapid pace and alleviate the revenue cap that current production strain has created.
Additionally, Very could see an additional $8.5M from this financing within the next 18 months, if all investors in the deal chose to exercise their warrants. The additional capital will assist with the initial investment needed to get the Patterson production facility and Mt. Pleasant R&D facility online within the next year.
Continue Reading the Full Release Below
The Very Good Food Company Announces Closing of Oversubscribed $13.2 Million Bought Deal Public Offering
Vancouver, British Columbia, December 4, 2020 – The Very Good Food Company Inc. (CSE: VERY) (OTCQB: VRYYF) (FSE: 0SI) (“Very” or the “Company”) today announced the closing of its previously announced bought deal prospectus offering (the “Offering”) of 3,778,900 units of the Company (the “Units”) at a price of $3.50 per Unit for aggregate gross proceeds of $13,226,150, which included the full exercise of the over-allotment option by the lead underwriter and sole bookrunner for the Offering, Canaccord Genuity Corp. (“Canaccord”).
The Company intends to use the net proceeds from the Offering to fund the commencement of operations at its recently announced new production facility in Vancouver, British Columbia (the “Rupert Facility”) and for general corporate purposes.
Mitchell Scott, the Company’s Chief Executive Officer stated: “We are thrilled to see investor confidence continually increase as we expand the scope of our operations and outline a path for future growth. Demand from wholesale and e-commerce customers continues to grow, and this financing will help us launch the Rupert Facility, our most significant near-term avenue for increasing production volume. As we focus on scaling the business, we are building the executive team, infrastructure and capital to do so effectively.”
Each Unit consisted of one common share in the capital of the Company (each, a “Common Share”) and one-half of one common share purchase warrant (each whole warrant, a “Warrant”), with each Warrant entitling the holder to purchase one additional Common Share (each, a “Warrant Share”) at a price of $4.50 per Warrant Share until June 4, 2022.
Canaccord received a cash commission equal to 8% of the gross proceeds of the Offering and an amount of compensation warrants of the Company (the “Compensation Warrants”) equal to 8% of the aggregate number of Units sold pursuant to the Offering (other than for sales to certain subscribers on a president’s list agreed upon by the Company and Canaccord for which a reduced commission was payable). Each Compensation Warrant entitles the holder to purchase one additional unit of the Company (each a “Compensation Unit”) at a price of $3.50 per Compensation Unit until June 4, 2022. The Compensation Units have substantially similar terms as the Units sold pursuant to the Offering. Canaccord also received a corporate finance fee comprised of 30,000 Units.
The Offering was completed pursuant to a short form prospectus dated November 24, 2020 filed in the provinces of British Columbia, Alberta, Saskatchewan, Ontario, New Brunswick and Nova Scotia and on a private placement basis in the United States pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended.
The Company today also announced the closing of a private placement (the “Private Placement”) of 285,714 units of the Company (the “Private Placement Units”) at a price of $3.50 per Private Placement Unit for gross proceeds of $999,999 to accommodate investor demand that could not be included in the oversubscribed Offering. The Private Placement Units have substantially similar terms as the Units sold pursuant to the Offering but the Common Shares and Warrants comprising the Private Placement Units are subject to a four month hold period until April 5, 2021.
Disclaimer: The Very Good Food Company is a communications client of Edge Investments, and we own shares in the company.