Editor’s note: This story was originally published on April 10, and was most recently updated on April 28.
Long before the coronavirus hit, cannabis companies were having a rough time. The end of 2019 brought deflation of a bubble that, starting in mid-2018, swelled and sent cannabis stocks soaring month after month. Soon enough, regulatory realities and delays set in, and the returns on investments looked more distant and uncertain.
The start of 2020 has been marked by seemingly endless layoffs and cutbacks, and while it’s unclear exactly how much of that is continued fallout from 2019 and how much is due to coronavirus, the pandemic certainly has played some role. Or so the companies have started to say, as of one month ago.
So here at Cannabis Wire, we’re keeping track of every layoff, cutback, or other announcement in which the company points to COVID-19 as a contributing factor.
The company, which is behind the Mission brand stores in a handful of states, including Illinois and Massachusetts, wrote in an announcement at the end of March, “given the ongoing uncertainty in the market and the economy due to Covid-19, the Company will suspend further formal guidance at this time. The Company expects to provide reinstated guidance for both 2020 and 2021 when it has more visibility into the operating environment.”
That same announcement had some rough updates, but they weren’t necessarily coronavirus-related: headcount reductions between 40-45% (both corporate and overhead for Mission shops), estimated to save $7-8 million a year; “Delaying projects that require significant capital expenditures with uncertain near-term benefits;” and “divestiture,” for $6 million, of the company that managed a Mission shop in Arizona.
The company noted that the headcount reduction was four months in the making, and that one of its delays, a manufacturing facility in California, was due to market factors in the state “prior to the COVID-19 pandemic.”
In early April, Acreage announced that it had: furloughed 122 employees (including corporate); temporarily closed a shop in Maryland, a shop in North Dakota, and a wholesale operation in Iowa, among other operations in California, Oregon, and Washington; killed two pending acquisitions, including Greenleaf Compassionate Care Center in Rhode Island and Deep Roots Medical in Nevada; the resignation of executive vice president and chief people officer Steve Hardardt
Howard Schacter, Acreage VP of communications, told Cannabis Wire, “The significant impact of the COVID-19 pandemic and other uncontrollable factors have greatly shifted the cannabis landscape. Temporarily closing our North Dakota Botanist location is one of several moves we’ve made this week that are all intended to enable our company to maintain its business goals of profitability, conserve cash and to execute on our strategic plan.”
Last September, Cresco announced the acquisition of Tryke Companies. At the time, the deal was valued at $282.5 ($55 million cash). But now, that deal is over, and Cresco will instead pay “equity valued at $1.25 million as total consideration for the termination.”
Tryke, which has locations in Nevada and Arizona, is perhaps best known for its Reef Dispensary in Las Vegas. The company is also the only distributor of Wiz Khalifa’s branded Khalifa Kush products in both states.
Cresco CEO and co-founder Charlie Bachtell said in the announcement, “Our acquisition of Tryke has been impacted by regulatory delays, a decline in capital markets, and now COVID-19, which brought additional risk to this transaction. Given these events, we feel the resources previously targeted for this transaction are better invested in our existing markets, where we have high visibility and certainty of return on capital.”
The company announced in late March that, in response to a “COVID-19 Declaration of Emergency by the Government of Ontario and confirmation of the presence of coronavirus infections in the town of Cobourg,” where the company’s facility is located, “Effective immediately, FSD Pharma management has implemented a systematic and orderly scale back of FV Pharma’s cultivation operations and a furlough policy for its workforce, except for certain personnel working staggered shifts to ensure continuity of operations and licensure. The Company has also closed its facility to collaboration partners and ceased their operations.”
Green Growth Brands
In late March, the company announced that Peter Horvath would step down as CEO and from the board. COO Randy Whitaker would take on the role of interim CEO. Also, the company said it would temporarily close its cannabidiol kiosks in malls, “in response to the ongoing COVID-19 pandemic and in accordance with the recommendations of health professionals and other mall-based retailers.”
In February, the company already announced that it planned to sell its CBD assets, which include their brand names Seventh Sense and Green Lily, to The BRN Group. The company said it will instead focus on its cannabis assets, which are not insignificant: GGB spent $55 million to acquire a Florida medical cannabis license and, as Cannabis Wire uncovered, has one of the largest footprints in Nevada.
Harvest Health and Recreation (and Verano)
In early 2019, M&A activity across the cannabis industry was rapidly taking place. By the end of 2019, deal terms were changing as companies adjusted to a deflated market. Now, it looks like most of those deals might not make it.
The Harvest-Verano deal had one of the cannabis industry’s highest price tags when it was first announced last April: $850 million. In late March this year, the companies announced that they have mutually agreed to kill the deal.
“Prolonged obstacles in meeting requirements for state and local regulatory authorities needed to transfer ownership and operational licenses, adverse capital market conditions, a challenging environment for asset sales, all contributed significantly to the decision not to move forward with the pending acquisition,” the announcement read.
George Archos, Verano Holdings’ CEO, explicitly called out COVID-19 as a factor.
In early April, iAnthus was due to release its Q4 and FY 2019 earnings, but the company called it off. In short, the company, a multistate operator that holds one of ten available medical cannabis licenses in New York, is in distress and has formed a special committee for “implementing the operational and financial restructuring of the Company.”
In the announcement, the company wrote:
“The decline in the overall public equity cannabis markets, coupled with the extraordinary market conditions that began in Q1 2020 due to the novel coronavirus known as COVID-19 (“COVID-19”) pandemic, have negatively impacted the financing markets and have caused liquidity constraints for the Company. Despite its best efforts as of this date, the Company has not been able to secure a further round of financing since December 20, 2019, whether as part of the larger financing plan previously announced on September 30, 2019 or from other sources.
iAnthus attempted in good faith to negotiate with the holders of the Secured Debentures for temporary relief of interest payments, but the parties were not able to reach a satisfactory agreement. As a result, iAnthus and its subsidiaries did not fund the March 31, 2020 interest payment totaling $4.4 million to the holders of the Secured Debentures and Unsecured Debentures.”
Lift & Co.
The events-focused cannabis media company announced layoffs in late March and said that it was acting to “preserve value amidst global pandemic.”
The company wrote, “Specifically, due to the COVID-19 pandemic and the effects the pandemic is having on event businesses around the world, the Company has made difficult and strategic decisions intended to preserve cash and long-term shareholder value.”
The company announced in late March that it is “withdrawing its fiscal year 2020 and 2021 revenue and store count guidance … due to uncertainty surrounding the magnitude of the novel coronavirus … and its impact on retail operations in its core markets. In addition to COVID-19, unanticipated delays in licensing, particularly in California and Massachusetts have also impeded the Company’s ability to achieve its revenue and store count targets. The Company is also withdrawing its guidance as to the timing of the Company generating positive adjusted EBITDA, positive EBITDA and positive free cash flow.”
The company also announced it raised another $12.5 million from Gotham Green Partners, and that it sold a cultivation and manufacturing facility in Illinois for $17 million.
And finally, “to support the Company in the development and execution of its turnaround and restructuring plan,” MedMen retained SierraConstellation Partners, a company that describes itself as an “interim management and advisory firm that provides services to middle-market companies navigating their way through difficult business challenges.”
In early April, the company announced the “temporary layoff of approximately 45 per cent of its workforce primarily to help boost COVID-19 containment efforts.” Or, ~400 people.
CEO Greg Engel said, in the announcement, “These are unprecedented and trying times.”
The company said that it would pay a “lump-sum” to these employees that should cover them until government aid kicks in, and that it would “absorb the employee paid portion of health, dental and short-term disability premiums for all employees during this difficult time.”
Supply shortages are not anticipated, according to the company, but they will “deprioritize lower value products requiring higher manual labour.”