Zenabis Drops After Signing New Growing Partnership

Two British Columbian cannabis producers have agreed to a new shared cultivation deal that will allow for the production of dried flower in the thousands of kilograms.

After the markets closed on Tuesday (October 22), Zenabis Global (TSX:ZENA) and privately held cannabis producer Tantalus Labs announced the deal, which is for an unspecified amount of cannabis production. No other details, such as compensation or breaking fees, were given.

The plants will be grown and harvested at Zenabis’ Langley, British Columbia, facility. Later, the Tantalus Labs team will take care of drying, trimming and packaging the resulting product.

Tantalus Labs’ methods and growing style will be used for specific segments of marijuana at Zenabis’ operation. These plants will originate from genetic material from Tantalus Labs.

Andrew Grieve, CEO of Zenabis, said he is pleased his company was picked for this partnership with a company known for its “meticulous approach” at growing.

“We share Tantalus Labs’ commitment to continuously push growing practices and standards onward and upward for the efficient production of high-quality, sungrown cannabis,” Grieve said.

Shares of Zenabis dropped sharply as the markets opened on Wednesday (October 23). The company had seen a decline of 7 percent by 10:32 a.m. EDT, resulting in a price per share of C$0.46. Eventually, trading settled for the company and it closed the day with only a 2 percent drop for a price of C$0.49.

Tuesday’s release indicates that the cultivation agreement’s initial term will be two years, with growing and supply taking place in 2020 and 2021.

Tantalus Labs CEO Dan Sutton shared excitement for the possibilities of this new partnership.

“This relationship will allow Tantalus to deliver our sungrown quality promise to an expanding audience in Canada, while collaborating with some of the brightest agricultural minds in this new Canadian cannabis industry,” Sutton said.

Zenabis faces stock market hardship

The share price drop for Zenabis continues a negative trend for the company this week. On Monday (October 21), the firm was forced to adjust development plans for its expansion in Langley, the same facility that the Tantalus Labs deal relates to.

Zenabis informed investors it will split its expansion plans into two phases, Zenabis Langley — Part 2B and Zenabis Langley — Part 2C, and it will also delay the new second stage of this expansion.

This delay was met with a drop in value for the British Columbian cannabis producer. Over a year-to-date period, shares of Zenabis have declined 92.25 percent, representing a loss per share of C$5.53.

“By early in the first quarter of 2020, we expect to have 111,200 kilograms of capacity licensed and operational with the approval of the Zenabis Langley — Part 2B amendment,” Grieve said.

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