British American Tobacco strengthens its stake in Charlotte's Web

The tentative recovery of the US CBD market continues to reshuffle the deck in the industry. This week, Charlotte's Web Holdings, one of the world's leading hemp-derived CBD brands in North America, announced a major financial restructuring operation with British American Tobacco (BAT). The agreement not only wipes out the group's main debt, but also results in a significant increase in the tobacco giant's share capital.

This announcement comes at a time when Charlotte's Web is racking up losses despite relatively stable sales, illustrating the persistent difficulties CBD players face in achieving profitability in a still uncertain and fragmented US regulatory environment.

Debt-for-equity swap redefines the company's capital structure

At the heart of the agreement is the conversion of a convertible debt of $54.2 million, plus accrued interest, into shares. The conversion price was set at 0.68 $ per share, and the operation should erase approximately 65 million in debt, This eliminates long-term obligations and puts an end to future interest accumulation.

In parallel with the restructuring, BAT's investment arm will also be injecting 10 million in additional liquidity through a private placement. The combined operation will result in the issue of approximately 110 million new shares, which will significantly dilute the stake of existing shareholders.

The transaction remains subject to shareholder and stock exchange approval, with a vote scheduled for a meeting on May 28, 2026.

BAT becomes majority shareholder, with a stake of around 40 %

Once completed, the restructuring will increase BAT's stake in Charlotte's Web to approximately 40% on a non-diluted basis. BAT previously owned approximately 20%, following an initial investment in 2022.

Although Charlotte's Web has clarified that BAT will not manage day-to-day operations, the tobacco giant will gain influence through its governance rights. BAT will be able to appoint directors in proportion to its shareholding, consolidating its role as the company's main strategic partner.

According to financial reports, BAT will also benefit from minority protection rights and pre-emption rights, while accepting ownership restrictions aimed at keeping its stake below the 49 % threshold.

Stable sales, falling losses and a drive for innovation

Charlotte's Web has published its financial results 2025 shortly after the agreement was announced. The company recorded annual sales of $49.9 million, practically unchanged from the previous year. Losses remain substantial, however: the company reported around 30 million in losses in 2025.

Fourth-quarter sales rose by 4.7 % year-on-year to $13.3 million, thanks to the launch of new products such as gummies Brightside low-dose hemp THC, sleep products, functional mushrooms and minor cannabinoid formulations.

The company also announced a full-year gross margin of 43,5 %, Operating expenses were down thanks to cost-cutting measures. General and administrative expenses fell by 21 % to $42 million, helping to reduce the operating loss to 20.3 million dollars, 32 million in 2024.

Charlotte's Web ended the year with approximately 8 million in cash, requiring a new capital injection.

A strategic pivot towards healthcare and clinical trials

In addition to retail sales, Charlotte's Web is now focusing strongly on medical channels and clinical development. The company says its improved balance sheet will help fund its participation in a Centers for Medicare & Medicaid Innovation which could allow Medicare beneficiaries access to CBD-based products derived from hemp.

CEO Bill Morachnick described the Medicare breakthrough as «a historic breakthrough, enabling seniors to access physician-prescribed CBD within the healthcare system.».

Charlotte's Web also works through DeFloria, its joint venture with BAT and Ajna BioSciences, which is preparing to launch the phase 2 clinical trials CBD treatment in mid-2026.

Tobacco companies continue their breakthrough in cannabinoids

BAT's growing involvement reflects a broader trend: major tobacco manufacturers are actively expanding beyond cigarettes into so-called «reduced-risk» categories, including e-cigarettes, oral nicotine and cannabinoids.

German medical cannabis company Sanity Group recently acquired by Organigram, 45% owned by... British American Tobacco.