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Marijuana plants are shown in this undated handout image provided by Aphria.HO/The Canadian Press

Aphria Inc. has entered into an agreement to raise $100-million from an unnamed investor – the first significant equity deal in the Canadian cannabis sector since a bruising selloff in pot stocks began almost a year ago.

The Leamington, Ont.-based marijuana grower said Friday that a single “institutional investor” has agreed to buy 14 million units of the company at $7.12 apiece. Each unit comprises a common share and half of a $9.26 share purchase warrant.

The company says it will use the proceeds for international expansion and working capital.

It did not respond to questions about the identity of the investor.

Aphria’s stock price dropped 8.6 per cent Friday in the wake of the announcement, closing at $6.93.

Massive equity deals were common in the cannabis industry between 2016 and 2018, as valuations exploded in the lead-up to recreational legalization in October, 2018. Over the past year, however, a combination of poor financial results and a slow roll-out of retail stores in many provinces has led investors to sour on the industry.

Only one strategic investment in the latter half of 2019, Imperial Brands PLC’s $123-million convertible debenture investment in Auxly Cannabis Group Inc., broke the $100-million mark.

Going into 2020, the market is still facing capital constraints, said Graeme Kreindler, an analyst with Eight Capital. However, as Friday’s deal shows, some cannabis companies are able to raise money in this environment, he said.

"There's going to be much more selectivity going forward, and there will be investors who are willing to fund businesses that they think will succeed, but that doesn't necessarily mean they're willing to fund every single business that has cannabis associated with it," Mr. Kreindler said.

Aphria, which sells cannabis under the brands Broken Coast Cannabis Ltd., RIFF, Solei and Good Supply Cannabis, has managed something of a turnaround over the past 12 months. The company was rocked by a short-seller report in December, 2018, alleging insider dealing, which precipitated the departure of the company’s chief executive and several top executives. It then posted disappointing numbers for the first several quarters of legal recreational sales.

It managed to get on more solid footing in the second half of 2019, increasing sales and showing several quarters of positive earnings before interest, tax, depreciation and amortization (EBITDA).

It did lower its fiscal 2020 sales target by $70-million, or 10 per cent, when it reported earnings earlier this month. However, it has a higher market share and a better cash position than most of its peers.

"There’s a lot of dried powder available to that company,” said Mr. Kreindler, pointing to the $600-million in cash that Aphria will have on its balance sheet once Friday’s deal closes.

With the identity of the institutional investor a secret, it’s not really clear how to interpret the investment, said Greg Taylor, the chief investment officer of Purpose Investments and manager of its Marijuana Opportunities Fund.

“The biggest question that comes out is: ‘Is this a short cover or is this a real investment?’” Mr. Taylor said, referring to a strategy that involves hedge funds short selling a company’s stock, then using a financing to close out their position.

Either way, the deal should be viewed as a positive, Mr. Taylor said. “If there is any money coming into the sector, whether it’s short covering or long, it does definitely help the sentiment.”