Why Charlotte's Web Tanked on Tuesday

Charlotte's Web (OTC: CWBHF) announced Tuesday that it is floating 10 million "units" of the company in an underwritten public offering. The issue's underwriting syndicate will purchase these for 6.75 Canadian dollars ($4.96) for total gross proceeds of C$67.5 million. The stock closed down by nearly 14% on the news.

"Units," which are combinations of common stock and warrants, have become a trend lately in marijuana industry capital-raising. In this case, Charlotte's Web's units consist of a single common share of the marijuana company, and one-half of a warrant to buy a common share.

Each full warrant's exercise price is C$8.50 ($6.24), and can be exercised within a two-year period following the issue's closing date. This price is, however, "subject to adjustment in certain events," which weren't specified in the company's announcement.

Source Fool.com