Here's Why This Tobacco and Marijuana Stock Plunged as Much as 16%

Here's Why This Tobacco and Marijuana Stock Plunged as Much as 16%

Shares of 22nd Century Group (NYSEMKT: XXII), a plant-biotechnology company focused on controlling the levels of nicotine and nicotinic alkaloids in tobacco plants and cannabinoids in cannabis plants, tumbled as much as 16% during Monday's trading session. The culprit? Look no further than the announcement of a registered direct share offering before the opening bell.

The early-morning press release from 22nd Century notes that the company entered into an agreement with institutional investors to receive $54 million in gross proceeds from the sale of 20.57 million shares at $2.625 per share. Unfortunately, 22nd Century Group closed on Friday, Oct. 6, at $3.41 a share. That's a 23% discount to the previous closing price, and the main reason that this tobacco and marijuana stock is getting clobbered today.

Image source: Getty Images.

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Source: Fool.com