Charlotte’s Web Reaches Deal with BAT Unit to Convert Debt into Equity

LOUISVILLE – Charlotte’s Web Holdings Inc., the Colorado-based maker of CBD hemp extract products, announced it had reached an agreement with a subsidiary of British American Tobacco (BAT) to convert a large convertible debenture into common shares and secure a fresh $10 million cash infusion.

The transaction would eliminate roughly $65 million in long-term debt from the company’s balance sheet while bringing in new capital to support operations and a planned push into Medicare-related programs. In return, BAT’s investment arm would end up owning about 40% of Charlotte’s Web.

Under the terms, BT DE Investments Inc., the BAT subsidiary, will convert its full C$75.3 million principal debenture [originally issued in November 2022] plus about C$14.2 million in accrued interest into shares at C$0.94 each. That exchange alone accounts for roughly 95.3 million shares. BAT will also buy up to 14.8 million additional shares in a private placement for $10 million, at a price set as the greater of C$0.94 or the maximum permitted discount under TSX rules based on the five-day volume-weighted average price before closing.

The combined move hands BAT roughly 110 million shares and represents a total equity commitment of about $75 million. Once completed, Charlotte’s Web would have no long-term debt and a simpler capital structure. Interest payments that had been running at 5% annually, projected at up to $12 million more by the debenture’s original 2029 maturity, would cease.

Company executives framed the deal as a pragmatic step to clear a balance-sheet overhang that had become costly and unlikely to convert voluntarily at the original terms. “BAT’s decision to convert its debenture to equity and invest additional capital removes our largest remaining liability and strengthens our shareholders’ equity,” CEO Bill Morachnick said in the release. CFO Erika Lind added that the changes, paired with recent cost-cutting, positioned the company to fund near-term priorities.

The new cash is earmarked in part for Charlotte’s Web’s anticipated participation in the Centers for Medicare & Medicaid Innovation pilot program, assuming regulatory clearances. The company has also been investing alongside partners in clinical work, including an FDA Phase 2 trial program involving DeFloria and AJNA BioSciences.

The agreement requires approval from Charlotte’s Web shareholders at a special meeting expected around May 28 and from the TSX. An amended investor rights pact would give BAT board nomination rights tied to its ownership level, including a floor of two directors as long as it holds at least 10%, while leaving day-to-day management with the existing team.

Charlotte’s Web, which reported $49.9 million in FY 2025 revenue and narrowed its operating loss to $20.3 million, closed 2025 with about $8 million in cash. Its shares on the TSX fell about 5% to C$0.89 on the day of the announcement; the OTC listing closed at $0.64.

For Charlotte’s Web, the deal relieves financial pressure and buys time to evaluate Medicare reimbursement pathways — a potential first for hemp-derived CBD in that channel. Shareholders will absorb meaningful dilution, but the company exits the transaction debt-free and with a reinforced partner that has backed it since the 2022 debenture. However, sustained operational momentum will require strong execution in the medical channel and outcomes from the pilot program. Similar balance-sheet resets have occurred in the Cannabis sector before; this one simply comes with clearer financial math and a larger institutional backer at the table.