Cannabis Weekly Round-Up: Cannabis Operators Head for Dispute

In the first trading week of 2021, two cannabis operators kicked off the new new year with a payment claim dispute.

Meanwhile, another cannabis firm now seems to be on the move with new deals after going through a difficult transitional period.

Keep reading to find out more cannabis highlights from the past five days.

Zenabis and Sundial begin financial dispute

On Wednesday (January 6), Sundial Growers (NASDAQ:SNDL) informed the market that it has delivered a notice of default to Zenabis Global (TSX:ZENA) in regards to a senior loan between the two firms.

This was done in spite of a $7 million payment completed by Zenabis on December 31, 2020. The previous day, Sundial had closed the acquisition of a special purpose vehicle; in doing so, it took over $58.9 million of Zenabis’ senior secured debt.

Sundial claims the terms still apply despite the payment. When it made the purchase, Sundial described Zenabis’ senior secured debt as a plus in its investment decision.

According to Sundial’s statement, Zenabis is disputing the default handed down. The company is claiming wrongdoing from Sundial in an attempt to pursue an acquisition.

“In the Company’ view, the actions taken by Sundial since December 30, 2020 clearly demonstrate that Sundial made such investment in an attempt to coerce Zenabis into being acquired by Sundial,” Zenabis told the market in its own statement on Wednesday.

Zenabis claims it was nearing an extension on its repayment obligation with the original lender before Sundial stepped in with its investment.

Unfortunately for investors, the affair has turned into a disagreement between the two companies. The $7 million payment from Zenabis was completed thanks to a sale of cannabis product to an undisclosed producer in the Canadian market.

“(Zenabis) believes the Senior Lender’s allegations to be spurious and without merit and intends to vigorously defend against what it considers to be an ill-disguised attempt to circumvent a fair and competitive process to acquire the Company by improperly foreclosing the equity of the Company or compelling Zenabis to enter into a transaction with Sundial,” the firm said.

In an attempt to deter a Sundial acquisition, Zenabis also made public the fact that it is currently evaluating a potential merger with a cannabis producer after engaging with Echelon Wealth Partners as a financial advisor to pursue “alternatives to maximize shareholder value.”

Australis Capital starts shifting operations

Investors who were looking for change with Australis Capital (CSE:AUSA,OTCQB:AUSAF) got it this past week, when the firm confirmed the arrival of Terry Booth as it new CEO as part of an acquisition deal.

First off, the cannabis investment operation announced a deal for the purchase of Green Therapeutics, a Nevada-based firm with recreational assets. The company also holds assets in Oklahoma and Missouri.

Then Australis confirmed a deal to acquire a majority stake in 2750176 Ontario, otherwise known as ALPS, a company focused on “design, construction management and post-commissioning services for horticultural facilities.” Australis argues it will be able to leverage ALPS’ business relationships to secure low-cost cultivation and offtake agreements.

Booth said this kind of business combination is hard to emulate and will offer a differentiating factor for his new company. Everything is being done with the intention of making Australis follow in the footsteps of the successful multi-state operator model in the US cannabis market.

“We believe that through ALPS we will be able to secure a supply of reliable and high-quality input material to fuel our multi-state roll-out, while at the same time generating free cash flow to accelerate the growth of our business,” departing interim CEO Duke Fu said in a statement.

This past week, shares of Australis jumped in value by double digits. The company started the week C$0.18 per share and as of Friday (January 8) it held a market value of C$0.44 per share. On Friday alone, shares of the company spiked up by over 15 percent just after 1:00 p.m. EST. The company also now holds a market valuation of C$78.51 million.

Cannabis company news

• The Valens Company (TSX:VLNS,OTCQX:VLNCF) launched a new set of THC and CBD water-soluble drops in the market thanks to a partnership with Verse Cannabis.

• The Supreme Cannabis Company (TSX:FIRE,OTCQX:SPRWF) announced that its first shipment of medical cannabis products to Australia has reached its destination and will become available through 10 gram containers.

• VIVO Cannabis (TSX:VIVO,OTCQX:VVCIF) confirmed its cannabis products will be entering the Quebec market as it also launches “additional solventless concentrates” across Canada.

• Jushi Holdings (CSE:JUSH,OTCQB:JUSHF) told investors about a new offering of subordinate voting shares in the company to raise approximately C$35.1 million. Jushi also increased its revenue guidance for Q4 2020 to between US$32 million and US$33 million, while for its whole 2021 operating year it now projects US$205 million to US$255 million in revenue and US$40 to US$50 million in adjusted EBITDA.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.