Cannabis is not for the faint-hearted. Cannabis remains illegal at the federal level, and little has changed. Legislative relief appears to be low on the priority list, while banking continues to be an ongoing issue. The rules for tax deductions vary greatly from one state to another. And don’t forget plunging wholesale cannabis prices and a three-year bear market for cannabis stocks.
Some operators may have given up on cannabis and thrown the towel in.
The bud is nipped in the bud
Recent news stories have highlighted cannabis businesses that have diversified into different industries.
22nd Century Group
22nd Century, a tobacco company struggling to make a profit with low nicotine products, switched over to marijuana as part of the “green rush”. In 2022 it bought CBD company GVB Biopharma, in a $55 to $60 million deal. In 2023 it sold GVB Biopharma for $2.5M to lower the operating costs and reduce its debt.
Sales have declined despite the renewed focus on low-nicotine cigarettes. One thing that works in its favor is its compliance with FDA’s new proposed tobacco product standard. Its product is currently the only combustible cigarettes on the market to meet the new standard.
City View Green Holdings, Inc. (OTCQB CVGRF).
City View Green, the latest cannabis company to abandon its efforts, is no longer interested in marijuana. The company received its cannabis-processing license in April 20, but has never made any money from the edibles it produces. Its latest quarter saw a loss of C$244,328.
After warning investors in January that it was considering a pivot out of cannabis to become an investment issuer, City View announced this month that it would spin out its wholly owned subsidiary, 2590672 Ontario Inc. The company announced that after the spinout it would continue to report as an issuer in order to carry out a reverse-takeover with a yet unidentified firm.
Scotts Miracle Gro (NYSE SMG:)
Scotts Miracle-Grow may be better known for their fertilizer but it seemed like they had struck gold in the beginning days of indoor hydroponic cannabis cultivation. Hawthorne’s sales were in the millions. Then, the situation quickly changed and profits began to decline.
Scotts spun off Hawthorne in January.
The BC Bud Corp.
BC Bud Corp. declared in February it would shift its focus from cannabis to digital assets and non-fiat currencies, as well as investments into the resources sector. Digital Commodities Capital Corp., the new name of the company that was created in March to fulfill this promise, has now been established. The company changed its symbol from RIPP to Digital Commodities Capital Corp.
Neptune Wellness Solutions (NASDAQ: NEPT)
Neptune Wellness decided to leave the cannabis business in 2023. The relief that the company felt at this time was evident from the earnings statement. Raymond Silcock, Chief Financial Officer of Neptune Wellness said: “The cannabis industry represented an unsustainable regulatory environment built upon the expectation that deregulation would occur. We have also removed obstacles on our way to profitability by selling this business.
Neptune’s cannabis business was sold for C$5.15million. The company’s focus is on Sprout, a brand of organic snacks and food for children.
SOL Global, Inc.
Return to 2019, SOL Global spent millions on cannabis businesses, such as Northern Emeralds (which became Bluma Wellness), MCP Wellness in Michigan, and Verano Holdings Corp. In 2021 it sold Bluma, but engaged in an intense battle with an investor over Verano’s shares.
The company’s cannabis assets were also being reduced, and by 2022 they would only make up 14% of the portfolio. In November 2023 the cannabis assets of the company outside of America were worth $95.8m, but in 2024 they had dropped to only $35.8m. In November 2023 the company’s U.S. cannabis holdings valued $6.7 million, but by 2024 they had dropped to only $300,000.
It still lists the CBD companies Common Citizen and Jones Soda on its website, but it focuses more on their digital assets. The company said in February that it planned to list on the Nasdaq and would have to sell any U.S. marijuana holdings.
Partial pivot
Some businesses just cannot quit marijuana but are trying to stop the bleeding by abandoning plant-related business.
TILT Holdings Inc.
TILT declared it would focus exclusively on vape equipment and be an asset light company. TILT originally consisted of a number of different brands: cultivation centers, dispensaries a software firm and Jupiter Vape. In 2020, it sold its software division. In 2023 the CEO Gary Santo left the company and the dismantling began.
Investors learned last week that the company has defaulted in its rental payments for Massachusetts and Pennsylvania properties.