On Thursday (January 30), Sundial Growers (NASDAQ:SNDL) saw a massive plunge of nearly 40 percent after revealing the resignations of its CEO and chief operating officer (COO).
The Alberta-based cannabis producer told investors that effective immediately, former CEO Torsten Kuenzlen will be resigning to “pursue other interests,” leaving board member Zach George to take over.
Former COO Brian Harriman will be succeeded by Andrew Stordeur, adding to Stordeur’s current role as president of the company’s Canadian operations.
The company opened at US$1.98 on Thursday, down from its previous close of US$2.58. As of 3:23 p.m. EST that day, the value of the cannabis producer had dropped 39.53 percent.
Sundial completed a showy initial public offering (IPO) in August 2019. Since then, shares of the company have continued to fall as the overall cannabis market faces a difficult period in the capital markets.
As a response to the slow rollout of cannabis stores in Canada — a concern shared by several other players in the Canadian cannabis space — Sundial has now launched a cost-optimization initiative meant to ensure its continued growth and reassure investors.
According to Sundial, the changes include workflow and process enhancements, realignment of product lines and “workforce optimization” to better manage costs.
With the changes, Sundial expects to save from C$10 million to C$15 million in the 2020 fiscal year.
“While industry delays adversely impact Sundial’s operations in the short term, the company expects to see a resumption of strong growth across the industry when the regulatory bottlenecks are removed and approvals for new products are granted,” the company said in Thursday’s press release.
Sundial has already put some of its cost-cutting measures in place and expects to see the fruits of its efforts in Q1, but said it will continue to monitor its operations in the current cannabis landscape.
When asked if the streamlining initiatives would represent any potential layoffs, a Sundial spokesperson told the Investing News Network: “We are positioning the company for future sustainability and long-term growth. We will continue to monitor industry dynamics and take steps necessary to ensure the ongoing success of the company.”
Kuenzlen’s departure is the most recent in a rash of executive losses at several cannabis companies.
“While it was a difficult decision, I believe given TerrAscend’s premier operating assets in the United States, it is now time for me to step into an advisory role and let new US-based management guide TerrAscend as they expand and scale,” Nashat said in a press release.
Earlier this month, The Supreme Cannabis Company (TSX:FIRE,OTCQX:SPRWF) let go of its now former CEO Navdeep Dhaliwal and made Colin Moore, a director at Supreme and former president of the Canadian branch of Starbucks (NASDAQ:SBUX), its new interim executive leader.
The news caused CIBC Capital Markets research analyst John Zamparo to lower his price target for Supreme to C$0.65 from C$1.25.
Departures follow legal troubles for Sundial
Sundial’s recent leadership transition follows a rocky summer for the firm.
Shortly after the company announced its IPO, it was hit with a class-action lawsuit that claimed Zenabis Global (TSX:ZENA) returned 554 kilograms worth C$2.25 million of cannabis to Sundial; it was allegedly contaminated with mold and pieces of rubber gloves, according to a report from MarketWatch.
Sundial responded by saying that in reality a “fraction” of the amount listed in the lawsuit was returned and the return represented a small percentage of the company’s total production capacity at the time.
Kuenzlen said the claims were baseless and the company was set on fighting the lawsuit.
In an interview with BNN Bloomberg in October, Kuenzlen further addressed the legal action.
“If you look at some of the articles involved, it does appear that there was more than one producer involved (when) the customer returned some product,” he said at the time. “We certainly did not get half a ton of pot returned to us.”
Kuenzlen didn’t specify exactly how much product was returned to the company, but did say it was significantly less than half the amount that was reported.
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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.