Per a recent filing with the U.S. Securities and Exchange Commission (SEC), Hightimes Holding Corp., the parent company of marijuana magazine High Times, reportedly defaulted on repayment of a promissory note. The repayment toward the $587,500 principal 5% senior secured note was due in September. The default has implications for Hightimes ahead of the company’s planned IPO and as the legal marijuana industry across the United States and further afield continues to grow.
Promissory Note Default
The reason for Hightimes’ default on the promissory note may have to do with the fact that the company has heaped on a heavy debt load in the hopes of capitalizing off of “considerable monetization opportunities” linked to brand licensing and e-commerce,” according to Motley Fool. Taking on millions of dollars of interest expenses each year, the company has seen its bottom line drop. This, in turn, has not only made it difficult for the company to raise enough funds for a traditional IPO, but it has also evidently contributed to more dire circumstances such as the recent default.
Why It Matters
Hightimes is not a major company in the growing legal cannabis field. Nonetheless, the company has seen the intense interest many investors have shown in the space. It makes sense why Hightimes would be interested in making a public offering, as it would be a prime time for investors to take part in investing in the company. In an effort to expand its range of products beyond its namesake magazine, Hightimes has also launched a growing competition called Cannabis Cup, developed and acquired online news outlets, and more.
Hightimes has a popular brand, but the company may rely heavily on its IPO in order to continue to generate sustained interest. One reason for this is that, unlike many other popular cannabis-related companies today, Hightimes does not actually offer any cannabis products or secondary products and services directly.
What Will Happen Next
The fact that Hightimes defaulted on its repayment means that a company called Gemini Finance Corp. has stepped in to acquire a significant portion of the company’s music and cannabis events division, called Wisdom Apparatus and Chalice Festivals USA for a low price. It also means that Hightimes has had to further extend its deadline for investors to take part in its pending Reg A+ initial public offering, originally slated to end on October 31st but not extended to as late as November 30th, 2018. This could dramatically impact investor enthusiasm and confidence in the company at a crucial moment. Hightimes may have taken too risky of an approach in its attempts at capitalizing off of the recent spate of investor interest in cannabis companies.