Tough Times Ahead For Licensed Producers As Financing Dries Up


Last week we covered how Ontario's removal of Cannabis stores from the essential businesses list could spell trouble for the industry in the short term. Just a few days after the announced shutdown however, it seems the Ford government has smartened up. Considering the potential loss of tax revenues, and loss of the share of cannabis sales in Ontario to the black market, a new initiative was announced: Ontario allows cannabis stores to offer delivery and pick-up (1)

We also covered how due to the shutdown, the online site OCS (Ontario Cannabis Store) which offers customers within Ontario the ability to order cannabis products online would have trouble processing the larger volume of orders (2). As predicted, that's exactly what took place. Earlier this week we saw that several OCS customers got notices of delayed shipping due to the larger than usual volume of orders taking place. Despite having staff working 24/7 round the clock, the OCS continues to experience difficulties addressing the cannabis demand in Ontario as it previously only accounted for a small percentage of Ontario's cannabis sales (3). 

Continued Industry Consolidation

CannTrust's 450,000 Sq. ft. facility in Niagara, Ontario

Despite demand continuing to show strength all across Canada for cannabis products, we believe that industry consolidation will continue to occur in 2020. As reported by the Financial Post: "The lack of financing is starting to take its toll on the weakest companies." (4). Cannabis is still a growing industry and sale of recreational products have only been legal since October of 2018. Several companies have thrown in the towel starting late 2019. This has only been accelerated in the last few weeks as COVID-19 takes its toll on the availability of financing for licensed producers. Let's recap some of the recent events:

CannTrust Inc.

Overwhelmed by lawsuits, compounded by delays over at Health Canada, CannTrust filed for creditor protection as of March 31st and confirmed that its stock would be delisting from the NYSE and TSX. It's among the larger licensed producers  in Canada to file for creditor protection to date.

James E. Wagner

A family-run Kitchener based cannabis company, reported on April 1st it is "...  filing to seek protection under Companies' Creditors Arrangement Act" (5).

iAnthus Capital

On April 6th, iAnthus put out a press release stating that it had defaulted on its debt obligations with the following press release: "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." (6).

True Leaf Cannabis

A British Columbia based cannabis brand specializing in cannabis and hemp wellness products for pets, announced on April 2nd: "After careful consideration of all available alternatives, it has commenced restructuring proceedings and is seeking creditor protection by filing a Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act (Canada)" (7).

Green Growth Brands

Based out of Columbus, Ohio,  this multi state operator which has operations in Nevada, Massachusetts and Florida announced on April 7th: "[it] has received a notice of default from MXY Holdings LLC (“Moxie”) related to a US$5,000,000 note" (8).

Licensed Producers Continue To Make Tough Decisions

As a result of credit drying up, several companies have been forced to take drastic measures in order to stay afloat and preserve their business for the foreseeable future. Some might argue that some of these measures aren't drastic enough given the circumstances. We are continuing to see  large rounds of layoffs, halting of cannabis production and cultivation, and simply put bad financing deals. Let's recap some of the recent events:


On April 6th, we saw that Organigram Holdings reported it is laying off 45% of its workforce at approximately 400 employees across all areas of its business. Although a temporary workforce reduction measure, it's not the first to do so. The CEO made the following statement: "Our priority right now is to make sound strategic decisions that are in the best interests of our people and which will contribute to the long-term sustainability of the company." (9).

Sundial Group

On March 30th, Sundial Growers announced their fourth quarter and full year earnings, they also announced to their shareholders: "The Company will require additional financing in the near term and has engaged financial advisors and is in advanced negotiations with potential capital providers including sources of debt and/or equity. These negotiations have been negatively impacted by the effects that the COVID-19 pandemic is having, and is expected to continue to have, on the overall business environment and financial markets generally. The Company continues to advance these initiatives; however, there is no certainty as to their ultimate completion or the timing thereof." (10). In an effort to cut costs, Sundial reported on April 9th that they will be scaling back cultivation and harvest operations at their facilities in response to current market conditions (11).


On April 7th, Hexo Corp. announced a $40 million public offering comprised of shares and warrants, as the company looks to bolster its balance sheet (12). This offering came a week after Hexo reported its 2nd quarter results on March 30th where it reported a loss of almost C$300 million including a C$138 million write down of its Newstrike Brands acquisition (13).


We expect continued pressure on cannabis firms, not because of lack of sales for cannabis products and derivatives, but due to lack of liquidity in the markets given the current economic environment. We expect to see several bankruptcies that are only accelerated by current market conditions. As a result, we advise investors in the space to exercise  caution and only pick the 'best horses' for an industry that continues to have a very bright future.

About The Author

I am an electrical engineering graduate from Carleton University, and have always had a keen interest in investing. I have been following events as they unfold in the cannabis space in Canada since 2017 and have always had the opinion that decriminalization is the way to go as it reduces drug related crime and can be monetized as a source of tax revenue for the government. My goal is to help people who invest in a risky space like cannabis understand what to look for, as the amount of information available is often overwhelming for new investors. Aside from that, there are several companies all competing with each other to get your investment dollars!


  1. Ontario to allow Cannabis stores to offer delivery and pickup, as black market looms 
  2. Cannabis stores no longer essential in Ontario: What this means for the industry
  3. Delivery delays an 'unfortunate side effect' of high volume orders
  4. Cannabis bankruptcies start to roll in as pandemic halts financing
  5. James E. Wagner agrees to consensual restructuring  
  6. iAnthus Announces Default of Interest Obligations to Debenture Holders on March 31, 2020
  7. True Leaf announces filing for stay of proceedings on creditors
  8. Green Growth Brands Announces Receipt of Notices of Default From MXY Holding LLC
  9. Organigram Lays Off 400 Employees Due To COVID-19
  10. Sundial Announces Fourth Quarter and Full-Year 2019 Financial Results
  11. Sundial Announces Operational Adjustments to Adapt to Current Market Conditions and Improve Liquidity
  12. Hexo shares plunge after pot firm raises $40M in public offering
  13. Hexo loss widens in latest quarter




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