With the combination of increased use of debt financing, tightening capital markets and a shakeout of winners and losers in growing, processing and distribution, insolvencies are a certain issue in the near future. But, there are very real obstacles to restructuring a cannabis business in both the US and Canada, certainly when compared to traditional industries.
There were 40 transactions in the North American Cannabis sector in August 2019, including 23 private placements, 2 public offerings, 9 mergers & acquisitions and 6 shelf registrations, with a total value of C$2.1 billion. Total deal volume increased by 5% over August 2018 and transaction value decreased by 62%.
Should an Independent Director of CannTrust have known about an illegal grow of cannabis in five rooms of the company’s primary asset? According to their Interim CEO, who was an Independent Director at the time of the illegal grow, the answer is No.
CannTrust Holdings (TSX: TRST; NYSE: CTST), a Canadian licensed cannabis producer, has lost over $600 million of market value in the last sixty days. In doing so, it has provided us with an excellent case study on what not to do in a crisis or turnaround.