During the past trading week (March 2 to 6), the cannabis industry’s largest player in Canada became a bit smaller after it announced some key facility closures.
Another marijuana firm took a beating in the open market as it was targeted by a short seller report, and a months-long dispute was resolved after the companies involved in a joint venture finally came to a working agreement.
Here’s a closer look at some of the biggest cannabis news over the week.
PharmaCielo stumbles on short seller report
Claims of securities fraud, undisclosed transactions and operational shortcomings raised in a report from a group called Hindenburg Research caused a massive slump for PharmaCielo on Monday (March 2), leading to a nearly 19 percent decrease in share price during the trading session.
The report, which picked a short position but did not disclose a price target, claimed that PharmaCielo co-founder and former CEO Anthony Wile created the company as a “self-enrichment scheme” after previously being charged by the US Securities and Exchange Commission (SEC) over allegations of fraud and market manipulation.
“PharmaCielo has property, greenhouses, licenses, and some residual cash. But with essentially no revenue, continued cash burn, and management’s track record of self-enrichment and the co-founder/former CEO’s history of securities fraud charges, we believe PharmaCielo ends up as a total loss for investors,” the short sellers wrote.
PharmaCielo fired back with its own statement on Tuesday (March 3), calling the report a “malicious attempt to manipulate” its share prices.
“I would encourage all of our shareholders to exercise caution in relying on the blatant misrepresentations contained within the short seller report in question,” current CEO David Attard said in a statement.
PharmaCielo said that the “libelous” report is being reviewed by outside legal counsel and that investors can expect the firm to respond quickly.
Over the past trading week, shares dropped 25 percent with an opening price on Friday (March 6) of C$1.20.
Canopy Growth closures a sign of rightsizing operations
In the middle of the trading week, cannabis giant Canopy Growth (NYSE:CGC,TSX:WEED) revealed that it was closing two key greenhouse facilities in British Columbia. About 500 employees were laid off as a result of the closures.
One portfolio manager said that the trimming on the part of the company isn’t cause for shock, however.
“It’s a big announcement (but) I don’t think it’s a surprise,” Charles Taerk, CEO of Faircourt Asset Management, a sub-advisor to Ninepoint Partners’ cannabis-focused fund, said in an interview with the Investing News Network.
Taerk said Canopy’s decision to cut its operations in Western Canada is ultimately a move in the right direction as companies look to prioritize efficiency over size. He mentioned that rightsizing plans had already been in motion after being discussed during Canopy’s earnings call for its Q3 2020 results in February.
“Mindful of future market growth, we’re prepared to take initial steps to rightsize our business over the next 90 days,” CEO David Klein said during the call.
In a statement, Canopy Growth noted that the closures are an effort to “align supply and demand while improving production efficiencies over time” in a struggling Canadian recreational market that’s been slow to develop.
Village Farms and Emerald settle JV dispute
In more Canadian cannabis news, marijuana firms in a long-standing dust up involving a joint venture have finally made nice through new agreements and a change in ownership.
Emerald Health Therapeutics (TSXV:EMH,OTCQX:EMHTF) and Village Farms International (NASDAQ:VFF,TSX:VFF) have come together to develop a settlement agreement with concern to their once equally co-owned cannabis producer Pure Sunfarms.
The original dispute dates back to October when Pure Sunfarms sent Emerald an invoice for about C$7 million in a “price deficiency obligation” relating to lower-than-expected wholesale marijuana prices.
Now, with a transfer of ownership stake, Village Farms and Emerald will have a 57.4 percent and 42.6 percent interest in Pure Sunfarms respectively.
“The settlement agreement allows Emerald, PSF and Village Farms to put their previous disputes aside and work together toward building on the tremendous performance of PSF to date,” Emerald President and CEO Riaz Bandali said in a statement.
The audit is looking into the purchase of bulk cannabis resin and legitimacy of the revenue generated from sales in the wholesale channel.
After receiving an extension from the SEC, Cronos said it had 15 days to file its annual report from the fiscal year ended on December 31, 2019.
It’s been a busy week for Halo when it comes to acquisitions as the firm also announced it got its hands on Cannalift Delivery, a software delivery company that is currently developing an app for easier cannabis product purchases.
The firm highlighted its recent work to establish a production center in South Africa and receive manufacturing and medicinal cannabis licenses for its Australian operations.
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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.