Another Canadian cannabis company has fallen victim to the weak market, with Zenabis Global (TSX:ZENA) announcing a significant cut to its workforce.
On Wednesday (March 11), the Vancouver-based licensed producer (LP), which has operations across Canada, confirmed it has let go of 22 percent of its overall workforce.
Shares of the company quickly fell in Thursday’s (March 12) trading session following the news. Zenabis opened at C$0.06, but midway through the trading day the firm had seen a drop of 21.43 percent in value, resulting in a price per share of C$0.05.
In a statement, Zenabis CEO Kevin Coft said the firm is aiming to become cash flow positive in 2020 through this operational efficiency measure.
Given the current climate for cannabis sales in Canada, the company does not plan to expand or create more growing options for itself; it believes its current capacity is enough to meet demand.
Although Zenabis expressed excitement about the expected growth Canadian cannabis sales could see from an increase in the availability of edible and infused products, the company told investors it anticipates that sales from the unregulated cannabis market will continue to impact wholesale prices, as well as the legal cannabis market’s expansion.
Zenabis joins a growing list of marijuana operations in Canada that have had to face cuts amid the financial realities of the capital markets.
Most recently, Canopy Growth (NYSE:CGC,TSX:WEED) announced plans to shut down operations at two facilities located in Aldergrove and Delta, BC. It also terminated approximately 500 positions.
In February, Tilray (NASDAQ:TLRY) confirmed it would let go of about 10 percent of its workforce. Similar reductions have been seen at Aurora Cannabis (NYSE:ACB,TSX:ACB) and The Supreme Cannabis Company (TSX:FIRE,OTCQX:SPRWF).
Charles Taerk, CEO of Faircourt Asset Management, a sub-advisor to Ninepoint Partners’ cannabis-focused fund, told the Investing News Network (INN) that the cuts from Canopy in particular were no surprise and will actually be beneficial to the firm in the long term.
“I think that there are many companies that are finding it difficult to operate in this capital-constrained environment,” he told INN.
Zenabis became part of another larger trend in the Canadian cannabis market when its CEO suddenly departed. In December, the firm notified investors that Andrew Grieve was out as its executive leader.
“Most of these cuts for costs will actually turn out to be positive and help the lifespan of these companies,” Nawan Butt, a portfolio manager at Purpose Investments, previously told INN in a wide-ranging conversation about the cannabis market.
Zenabis was also in the news last year when it faced pressure in the markets as it attempted to defend a rights offering plan.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.