Charlotte’s Web Holdings Announces Major Transaction with BAT: Debenture Conversion and US\$10M Equity Investment to Strengthen Balance Sheet

Key Highlights

• Charlotte’s Web Holdings, Inc. (the “Company”) announced a significant transaction with BT DE Investments, Inc. (“BAT”), a subsidiary of British American Tobacco plc (LSE: BATS and NYSE: BTI).
• The transaction involves the conversion of BAT’s outstanding convertible debenture into equity and a new US\$10 million equity investment by BAT.
• This transaction is expected to eliminate the Company’s largest liability, improve its balance sheet, and provide immediate liquidity for strategic initiatives, including participation in the anticipated CMMI Medicare pilot program.
• Shareholder approval is required for the transaction, with a meeting targeted for on or about May 28, 2026.

Detailed Transaction Overview

Charlotte’s Web’s Board of Directors evaluated and approved a transaction that addresses critical elements of the Company’s capital structure and supports its strategic priorities. The two key components of the transaction are:

• 1. Debenture Conversion:
  • BAT has agreed to convert its outstanding convertible debenture with a principal amount of C\$89,564,401 (approximately US\$65 million) into up to 95,281,277 common shares at a subscription price of C\$0.94 per share.
  • All accrued and unpaid interest will also be settled through the issuance of additional common shares at the same price.
  • This eliminates the Company’s largest remaining liability and avoids an estimated US\$12 million in future interest payments through to the debenture’s original maturity in November 2029.
• 2. US\$10 Million Concurrent Private Placement:
  • Simultaneous with the debenture conversion, BAT will invest an additional US\$10 million through a non-brokered private placement, further bolstering the Company’s liquidity and balance sheet.
• 3. Amended Investor Rights Agreement:
  • Upon closing, Charlotte’s Web and BAT will amend and restate their investor rights agreement. BAT will have the right to nominate directors according to its pro rata equity ownership, with a minimum of two nominees as long as it holds at least 10% of the Company’s equity.
  • The agreement also includes restrictions on equity issuances and new indebtedness, as well as adjustments to BAT’s top-up rights.

Strategic Rationale and Impact

• The Board determined that, due to recent trading levels, voluntary conversion at the original conversion price (C\$2.00) was unlikely, risking a continued large liability on the balance sheet and erosion of shareholder equity.
• Conversion at C\$0.94 per share aligns with current market values and immediately strengthens the Company’s financial position.
• The transaction removes ongoing interest expense and provides capital for near-term operational priorities, including the Company’s planned participation in the CMMI Medicare pilot program (subject to regulatory approval).
• The transaction demonstrates BAT’s continued support for Charlotte’s Web’s strategy and management.

Shareholder and Regulatory Approval

• The transaction is subject to approval by Charlotte’s Web shareholders and the Toronto Stock Exchange (TSX).
• A shareholder meeting is expected on or about May 28, 2026, with proxy materials to be mailed to shareholders of record as of April 6, 2026.
• Additional disclosures and proxy statements will be filed with the U.S. Securities and Exchange Commission (SEC) and made available to investors.

Post-Transaction Ownership Structure

• Following the transaction, BAT is expected to own up to approximately 110 million common shares, representing around 40.8% of the outstanding shares of Charlotte’s Web (on a non-diluted basis).
• This is a substantial increase from BAT’s pre-transaction beneficial ownership of up to 44,782,800 common shares (capped at 19.9% pre-transaction).

Management Comments

Bill Morachnick, CEO of Charlotte’s Web:
“In addition to this being an important balance sheet event, it also reflects support for Charlotte’s Web and its strategic direction. BAT’s decision to convert its debenture to equity and invest additional capital removes our largest remaining liability and strengthens our shareholders’ equity. The additional US\$10 million in new capital reinforces our financial position and provides greater flexibility to participate in the upcoming CMMI Medicare pilot program, subject to receipt of all regulatory approvals. We look forward to seeking shareholder approval to complete this Transaction.”

Erika Lind, CFO of Charlotte’s Web:
“Removing the debenture simplifies our capital structure and avoids approximately US\$12 million in future interest, in addition to repayment of the principal. We have worked aggressively over the last two years to reduce and optimize our cost structure. With these changes to our balance sheet and new infusion of capital, we are better positioned to fund near-term priorities.”

Important Information for Shareholders and Potential Impact on Share Value

• This transaction is highly significant and price sensitive. It will eliminate the Company’s largest liability, reduce ongoing interest expense, and provide a substantial capital infusion, all of which are positive for the financial health and future prospects of Charlotte’s Web.
• The large increase in BAT’s equity stake (to over 40%) may influence the Company’s governance, strategy, and future direction.
• Shareholders will be asked to vote on this transaction, which could be transformative for the Company.
• Until shareholder and regulatory approval is obtained, there is some uncertainty; if not approved, the Company could be left with significant ongoing debt and interest obligations.

Next Steps

• Charlotte’s Web will file preliminary and definitive proxy statements with the SEC and provide more information to shareholders ahead of the upcoming meeting.
• Shareholders are urged to read these materials carefully when available, as they will contain important information about the transaction and related matters.

Contact Information

• Shareholder Contact: Cory Pala, Director of Investor Relations
• Phone: (720) 484-8930
• Email: [email protected]

Disclaimer:
This article is provided for informational purposes only and does not constitute investment advice, an offer, or solicitation for the purchase or sale of any securities. The information is based on public filings and statements by Charlotte’s Web Holdings, Inc. and may be subject to change. Investors are urged to read all relevant filings and consult their own advisors before making any investment decisions. The Company undertakes no obligation to update forward-looking statements except as required by law.

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