Cannabis companies have been struggling amid a cash crunch in the sector. The big players are in a tough spot. Recently, Aurora Cannabis (NYSE:ACB) cut 25% of its workforce to hit profitability. Meanwhile, Tilray (NASDAQ:TLRY) had to cut 10% of its workforce for the same reasons. Some of the Canadian cannabis companies have enough cash-in-hand to survive the challenging period. However, many smaller US cannabis companies face bankruptcy. Many of the US cannabis companies seek bankruptcy protection from Canada.
US cannabis companies seek bankruptcy protection from Canada
Many US cannabis companies struggle to get financial help. Notably, marijuana still isn’t legal in the US. Last year, cannabis companies saw their revenue decline due to regulatory issues and black market sales. Smaller cannabis companies have struggled to recover from their losses. As a result, they might be heading towards bankruptcy. The House passed the SAFE Act or the banking bill last year, which could have helped cannabis companies get financial support. However, the bill is stuck in the Republican-controlled Senate.
Recently, Raymond James analysts said that while big companies might survive the crunch, smaller cannabis companies will likely head towards bankruptcy. The Los Angeles Times also discussed a prediction from a senior executive at a large cannabis company. The executive predicted that smaller companies might fail by the second quarter of 2020.
A Marijuana Business Daily article stated that because of rising financial constraints, US cannabis companies seek bankruptcy protection from Canada. US cannabis companies are facing problems with bankruptcy in the US since marijuana still isn’t legal at the federal level. As a result, US cannabis companies can’t seek protection in the U.S. Bankruptcy Court. Since marijuana is illegal, cannabis companies won’t be allowed to get Chapter 11 protection from creditors or a centralized sale process.
Published: February 20, 2020
Founder & Interim Editor of L.A. Cannabis News