Tilray Inc.’s (TLRY) high-flying shares encountered some resistance in pre-market trading after the medical cannabis producer said it is seeking to raise $400 million through a private placement of convertible bonds.

In a press release, the world’s largest publicly traded marijuana company announced that it will use the proceeds to fund working capital, future acquisitions and repay the $9.1 million existing mortgage on its British Columbia production facility. Tilray added that the interest rate on the senior notes it issues will be determined at the time of pricing and will be convertible into cash, shares or a combination of cash and shares.

The notes, due 2023, will be sold to "qualified institutional buyers" under U.S. securities law and accredited investors in Canada.

Tilray’s fundraising plan was not well received by investors. The stock fell 5.63% ahead of Thursday’s trading session, amid concerns that the offering could dilute existing shareholder ownership.

The sell-off might also partly be attributed to the company’s latest guidance. In a regulatory filing, Tilray said it expects revenues of between $10.0 million and $10.5 million in the third quarter.

That prediction represents nearly double last year’s tally of $5.5 million and beat Wall Street estimates. However, investors that paid a premium for the stock based on its rapid growth prospects may be disappointed that $10 million to $10.5 million is not a great increase on the $9.7 million of sales registered in the second quarter.

In the filing, Tilray also revealed that cash and equivalents were between $117.5 million and $118 million, as of Sept. 30, and that its long-term debt ranged between $9 million and $9.5 million. (See also: Tilray May Reach $100B Valuation, Says CEO.)

Investors Should Have Seen This Coming

The Nanaimo, British Columbia-based company isn’t the first pot stock to use debt as a financing tool. Earlier this year, Aurora Cannabis Inc. (ACB) issued 5% unsecured convertible bonds to funds its takeover of CanniMed Therapeutics, according to Bloomberg. Bloomberg also reported that Canopy Growth Corp. (CGC) currently has two $600 million Canadian dollar convertible senior notes in circulation.

These moves by peers, together with Tilray’s own admission in its IPO prospectus that the continued development of its business will require additional financing, indicate that the medical cannabis producer’s fundraising activities should not come as a big surprise. (See also: Tilray Shares Soar Defying Short-Sellers.)