The ongoing COVID-19 crisis may prove to be the straw breaking the camel's back for struggling cannabis companies. Two Canadian growers were forced to seek bankruptcy protection last week, while a US-based company was forced to default on interest payments yesterday.
CannTrust Holdings (NYSE :), (TSX 🙂 filed for bankruptcy protection on March 31. The Affected Breeder is the first of the top ten cannabis license holders in Canada to obtain protection under the Companies' Creditor Arrangement Act.
Some might argue that the good news is that what ultimately led to the downfall of CannTrust was not just a lack of operational viability, but rather the class-action suits that struck it in the wake of the pot producer's scandal flooded after it was discovered that the company was growing weed in unlicensed rooms in the greenhouse in Pelham, Ont. in 2019.
But that is a little comfort to the few remaining shareholders and the list of creditors with a total of C $ 3,744,483.15 (US $ 2,669,729.95.)
Under the terms of the protection, CannTrust can continue to complete its remediation plan to ensure that licenses for its greenhouses are maintained in Vaughan, Ont., And to restore its licenses for other facilities in Vaughan and Niagara. region.
In a statement by CannTrust, the company said it "hopes to leave CCAA protection well-positioned to restore trust to its stakeholders" and restart its operations. But that's a bet most investors wouldn't want to take.
CannTrust was forced to discontinue operations after Health Canada suspended its permits following an investigation into reports that it grew marijuana in unlicensed rooms. It was also forced to destroy US $ 54.6 million (C $ 77 million) in inventory.
The company subsequently fired its CEO and was forced to lay off some of its personnel. It has not submitted any financial reports since mid-2019.
And the ongoing COVID-19 crisis only complicates the procedure to restore the licenses.
CannTrust shares have been discontinued on both the Canadian and. And it is widely expected that both exchanges will scrap the company now that creditors are protected. The stock stopped trading on March 30.
James E. Wagner cultivation also strives for bankruptcy protection
Another Canadian-based pot grower, the James E Wagner Cultivation Corp (OTC :), (TSXV :), also filed for bankruptcy protection last week. According to the April 1 filing for creditor protection, the Ontario pot grower, who used a proprietary aeroponic platform called GrowthSTORM, said he had $ 41 million in liabilities. It traded on the TSXV in Canada and the US OTC market in New York and was discontinued yesterday.
James E. Wagner Weekly Price List
The company's shares have lost 97.56% of their value in the past year.
U.S. Pat. Pot grower defaults on payments
On Monday, the US-based cannabis company iAnthus Capital Holdings (OTC :), (CSE 🙂 made a statement stating that it would default on interest payments totaling US $ 159.2 million (C $ 223, 3 million), including US $ 97.5 million (C $ 136.8 million) on covered bonds, US $ 60 million (C $ 84.2 million) on unsecured bonds and US $ 1.7 million (C $ 2, 4 million) on & # 39; other debt obligations & # 39 ;. The company pointed to liquidity problems arising from the COVID-19 pandemic as one of the causes of default.
"It was a difficult decision not to pay the interest when it was due, but management and the board decided that it was in the interest of the company and our stakeholders to spend our money on the net asset value of to maintain our business, "said Hadley Ford, CEO of iAnthus in the statement.
"Despite challenging conditions, the company will continue to pursue expansion opportunities in retail, cultivation and production, as well as the further development of its retail and product brands," the statement continued.
iAnthus Weekly Price Chart
iAnthus also announced that it would postpone the filing of the fourth quarter and year-end for the period ending December 31, 2019, but did not say when these financial data would be presented.
The news sent shares of iAnthus off a cliff on Monday, falling nearly 62% to close at US $ 0.1785 in the US OTC market and C $ 0.24 in the Canadian stock exchange. In the past year, the company's shares have lost nearly 97% of their value.
