Canopy Growth (TSX: WEED) has placed its BioSteel division into bankruptcy proceedings under the Companies Creditors Arrangement Act in the Ontario Superior Court of Justice. The company has also move to seek recognition of the proceeding under Chapter 15 of the US Bankruptcy Code to give full force and effect to the orders in the United States.
In connection with the decision, Canopy has terminated 181 employees that were employed by the company in connection with the BioSteel division.
The move coincides with the decision by the company to cease funding BioSteel Sports Nutrition. The decision was reportedly made in an effort to simplify its business and cut its cash burn, after previously conducting a review of strategic options for the division. BioSteel reportedly accounted for 60% of the company’s Q1 FY2024 loss, while accounting for 30% of the revenues for the quarter, it’s largest segment next to Canadian cannabis.
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READ: Canopy Growth Reviewing Strategic Options For BioSteel, Including Potential Sale
Charges of $15-20 million are anticipated in connection with the filing, of which $3.7 million are related to payroll. Annual cost savings meanwhile are estimated at $100 million.
Canopy expects its financial position to be strengthened with the removal of cash expenditures related to the division, as well as with potential cash proceeds from the sale of the BioSteel assets. With the burden of BioSteel removed, Canopy is now forecasting that it can achieve positive adjusted EBITDA exiting FY2024 as the company resumes its focus on its core cannabis operations via an asset-light operating model.
Canopy Growth had a 90% stake in BioSteel Canada.
Canopy Growth last traded at $1.56 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
