Cannabis lender Chicago Atlantic (REFI) prices IPO at $16
15:09, 8 December 2021
Chicago Atlantic Real Estate Finance priced its initial stock offering (IPO) of 6.25 million shares to the public at $16 per share raising $100m, the company announced.
Trading over the Nasdaq exchange is expected to begin Wednesday under the ticker “REFI”. Closing is scheduled for 10 December, the company said in a news release.
The $16 per share IPO price came in at the low end of guidance set last week in a $16 to $18 per-share range. The 6.25 million shares offered represents 35.9% of the total equity in Chicago Atlantic.
Compass Point, JMP Securities and Oppenheimer are acting as joint book-runners for the offering, with Lake Street and East West Markets as co-managers. The underwriting group has the option to purchase an additional 937,500 shares within 30 days of the closing, bringing the total proceeds to a potential $115m.
Mortgage loans for cannabis industry
Chicago, Illinois-based Chicago Atlantic makes first-lien mortgage loans, primarily to companies involved in the cannabis industry, including state-licensed medical and recreational marijuana dispensaries and cultivation facilities. As of 22 November, 35.3% of the loans in Chicago Atlantic’s portfolio are backed by a personal or corporate guaranty. One loan in Chicago Atlantic’s portfolio, representing 10.8% of total assets, is subordinate to a first-lien mortgage.
“We believe that cannabis operators’ limited access to traditional bank and non-bank financing has provided attractive opportunities for us to make loans to companies that exhibit strong fundamentals but require more customised financing structures and loan products than regulated financial institutions can provide,” the company states in its amended S-1 shelf registration filed with the US Securities & Exchange Commission.
“We believe that continued state-level legalisation of cannabis for medical and adult use creates an increased loan demand by companies operating in the cannabis industry and property owners leasing to cannabis tenants.”
Limited historical performance data
Chicago Atlantic earned $5.14m net income or $1.40 per share on $5.30m in revenue through 30 September. Operating expenses totalled $159,740. As a new company formed on 30 March, Chicago Atlantic has no historical earnings or revenue before 2021.
Cash on hand through 30 September totalled $8.74m and zero debt. Chicago Atlantic has an untapped $10m revolving credit facility at a rate of Prime plus 150 basis points or 4.75%, whichever is greater. Chicago Atlantic has not securitised any of its loan portfolio
Chicago Atlantic plans to underwrite loans between $5m and $200m with loan terms ranging from three to five years. Chicago Atlantic plans to hold up to $30m total loan balances on its books, selling excess to third-party investors
As of 30 September, approximately 62.5% of its loan portfolio was variable-rate and 37.5% of its portfolio was fixed rate.
Read more: Chicago Atlantic IPO price set at - per share